The global debit transaction market is set to grow this year, with Europe leading the way. Wendy Atkins reports.

Lying at the heart of the retail banking profitability chain, the number of debit transactions that take place globally is rising steadily. During MasterCard’s recent debit conference in Lisbon, several new initiatives were announced, showing banks that the latest technology can help them leverage the power of debit.

Ann Camarillo, MasterCard’s chief debit officer, says: “Our biggest focus has become domestic debit. Most debit is used within 100km of someone’s home, and MasterCard is increasingly focused on being there. There are over 520 million Maestro debit cards issued in more than 93 countries around the world, of which in excess of 40 markets now use Maestro as both the domestic and international brand. This is the most secure approach to debit in the world, being PIN-based online. Debit is growing really fast everywhere and we’re looking at an order of magnitude for growth of MasterCard. While all markets are growing, Europe will be a key focus this year.”

More terminals please

A key aspect of MasterCard’s approach to promote Maestro card use is the recent launch of the MasterCard/ Maestro Terminal Implementation Programme (M-TIP), which will help to move acquirers, retailers and cardholders towards a wider and secure global card acceptance network.

The programme began with MasterCard reviewing opportunities with more than 30 manufacturers around the globe. Of these, three were selected on the basis of their global reach, product fit and overall service package. Pilots with these companies – terminal vendors Dione, Hypercom and VeriFone – have now finished and strategic alliances have been formed. Each vendor will offer competitively priced terminals and applications technology, fully supported by their merchant support services.

As Luke Olbrich, vice-president, debit business development, at MasterCard Debit Centre of Excellence, explains: “This programme is designed to get increased acceptance for Maestro around the world – and this can be done most economically for members with the roll-out of EMV [Europay, Mastercard, Visa]. M-TIP leverages the introduction of chip and PIN to rapidly expand the acceptance of Maestro.”

Developing market demand

“All terminals rolled out via M-TIP will be EMV,” says Mr Olbrich. “MasterCard will ensure all terminals also accept Maestro, which in turn means that more places accept it, consequently helping to grow global usage. Last year, 50,000 terminals were implemented through the programme. This year, a number of deals are now being finalised, including strategic one-on-one contracts with key acquirers in India, Argentina, Morocco and South Africa.”

As a number of banking and retail organisations reach the final stages of EMV-preparedness, demand for EMV terminals that can be used for debit functions is increasing worldwide. Developing markets, such as India, are now leading the call for low-cost terminals. Ms Camarillo says the country is seeing a 100%-150% growth rate of terminal output a year. However, as with other developing nations, a limited telecoms infrastructure can cause problems for online transactions. Consequently there is a growing spend on GSM-based systems.

“We’re trying to reach any consumer who spends because it is more economical to accept debit cards than cash or cheques,” says Ms Camarillo. “When MasterCard signed the State Bank of India exclusively to Maestro, the bank’s more than 100 million consumers expanded our focus. Whereas the focus had previously been on tier-one cities such as Delhi and Mumbai, tier-two and tier-three cities such as Bangalore, Madras and Hyderabad have now also been included.” Her view is supported by research from Edgar, Dunn and Company (see graph).

Upgrades needed

Away from the developing markets, other, more extensively penetrated card acceptance markets, such as the UK, Brazil and Switzerland, face a different challenge as they replace their local debit card brands with Maestro. They are having to upgrade their entire terminal estate to Maestro to support EMV chip and PIN.

Although MasterCard’s major focus is on the domestic market, it is widely understood that globalisation and a booming internationalisation of consumers’ private lives is opening new avenues for growth. With more people travelling and owning properties in multiple countries, there is a surge in demand for quick and cost-effective money transfer schemes.

In April 2004, MasterCard Europe announced that Bank Card Company (BCC) in Belgium and SPRON in Iceland had both signed up for its P-2-P (person-to-person) money transfer system, MasterCard MoneySend. They join the Royal Bank of Scotland group in the UK and CartaSi in Italy, both of which have been testing the service. The first cross-border transaction was successfully authorised and cleared on MasterCard’s transaction processing network in January 2004. According to Olivier Denis, product manager at MasterCard Europe: “The pilot will operate until December 2004 and we expect between 20,000 and 40,000 customers per member bank to use the service in that time. Banks have opted to join the trial as they see potential added value for their customers. The pilot will be operated in a controlled environment and we expect additional members to join the pilot before June.”

Security measures

A major issue for any cross-border transaction is security. In the case of MoneySend, a series of risk parameters can be set by each bank, including maximum value per transaction, maximum amount per month and how many times money is sent to one account. “The system is designed to segment customers who are more exposed to some categories than others,” explains Mr Denis. “It also offers the option of tracing a transaction end-to-end.

“With more than a billion cardholders worldwide, the potential for this service is enormous. The increasingly international lifestyle of European citizens – money remittance is currently growing at a rate of E5bn per annum – means that demand is growing for this service.”

Charges for each transaction are decided by individual banks; as yet they have not been published, says Mr Denis. “While the scheme is in a pilot phase, some banks are offering friendly conditions for transaction costs. When the pilot moves to live roll-out in the first quarter of 2005, it is expected that transaction costs will be positioned somewhere between domestic credit transfer and international credit transfer, making it more cost-effective than regular bank-to-bank cash transfers. The MoneySend business and pricing model is in line with the new EU directive on cross-border payments and is going in the direction of the OUR model.”

MasterCard says that transactions can be authorised in 30 seconds and the cardholder receives guarantees that the transaction has been processed within 30 seconds. The transaction is then cleared through the MasterCard network within 24 hours. MasterCard sees this as a major improvement on many existing schemes.

“One of the unique features incorporated into MoneySend is the pre-authorisation of the value of credit on the card account of the recipient,” says Mr Denis. “This is achieved by MasterCard sending a request for official authorisation from the receiving bank.

“This has advantages for both the customer and financial institution, as they are sure that when they get authorisation, the money transfer will be processed. Presently, when submitting the money transfer request to his or her bank, the customer is not sure whether the receiving bank in the receiving country will accept the payment – and it could be two weeks later when they discover the payment has been rejected.”

While the pilot is limited to transactions between MasterCard and Maestro cards, Mr Denis says the company may consider providing additional functionality in the future, enabling cardholders to transfer money directly to a foreign bank or competitor’s card.

With the market for debit opening up to consumers, merchants and financial institutions worldwide, new technology in the form of smart cards, terminals and mobile phones will have an increasingly important role to play. With high consumer demand for speedy yet secure services, debit schemes backed by the latest technology could prove a winning combination for both customers and banks. How Moneysend works The Moneysend system enables cardholders to use their mobile phone or the website of their bank to enter their password, specify how much money to send, which card to debit and who the recipient is. The recipient can be identified as an e-mail address, a mobile phone number, the MasterCard card number or Maestro personal account number (PAN). The MoneySend platform translates the recipient’s e-mail or mobile phone number into an associated PAN and then routes the transaction over the MasterCard network. The recipient then receives an e-mail or SMS message notifying them that the money has arrived.

PLEASE ENTER YOUR DETAILS TO WATCH THIS VIDEO

All fields are mandatory

The Banker is a service from the Financial Times. The Financial Times Ltd takes your privacy seriously.

Choose how you want us to contact you.

Invites and Offers from The Banker

Receive exclusive personalised event invitations, carefully curated offers and promotions from The Banker



For more information about how we use your data, please refer to our privacy and cookie policies.

Terms and conditions

Join our community

The Banker on Twitter