David Gosnell

It is perhaps a sign of the times. An EFT network that only switches PIN-based point-of-sale debit transactions is now the nation's largest network. And it achieves that status even after other networks include their in-network ATM transactions.

A U.S. district court in Concord, N.H., has ruled that states cannot regulate fees and expiration dates on network-branded gift cards issued by banks and thrifts regulated by the U.S. Office of the Comptroller of the Currency or the Office of Thrift Supervision.

PIN-debit interchange rates have remained stable over the past year, though increases may be on the horizon. For now, some electronic funds transfer networks have tweaked rates in various merchant categories, a recent survey by Cards&Payments sister publication ATM&Debit News has found.

Hawaiians are separated from the U.S. mainland by thousands of miles but lesser distances from each other as residents of an island chain. Because of these demographics, Bank of Hawaii is offering customers debit card air miles as usage rewards, despite the potentially high cost of such offerings.

American Express Co. is drawing a line in the sand over AmEx-branded gift cards. The card issuer is discontinuing distribution of its gift cards in states with the most restrictive regulations on network-branded prepaid gift cards.

Domestic electronic funds transfer networks traditionally have stayed out of international card transactions. But two networks have started to extend their reach.

States that dole out debit cards for funds distribution, such as court-ordered child-support payments, usually offer recipients other choices, such as a check or having the funds directly deposited into a bank account. The choice allows those with or without bank accounts similar convenient access to funds.

For many years, consumers have earned discounts on gasoline purchases for using certain credit card brands. Now, many consumers want debit card issuers to offer similar fuel-discount rewards.

Issuers and third-party distributors have high hopes on the sale and use of network-branded gift cards, or so-called "open-loop" prepaid debit cards. However, the lack of a direct banking relationship with cardholders is muddying regulatory authority over the cards.

Prepaid cards took on an essential role in helping displaced consumers get their lives back on track even though the Federal Emergency Management Association's card distribution proved a failure.

Within the next two years, the combined use of PIN- and signature-debit cards at the point of sale will surpass that of credit cards, suggest data contained in the 2006 edition of the ATM&Debit News EFT Data Book, which was published Sept. 15. ATM&Debit News is a Cards&Payments sister publication also published by SourceMedia.

Use of PIN-debit cards at the point of sale keeps growing, and so is the rate of growth. But only one PIN-debit network, Visa USA's Interlink, seems to be benefiting from the trend.

Merchant concerns over rising interchange rates for PIN-debit purchases appear somewhat justified, according to a recent survey of electronic funds transfer networks by Cards&Payments sister publication ATM&Debit News. But not all merchant categories need to be concerned, the survey found.

Earlier this year, Bank of America announced plans to discontinue marketing prepaid Visa cards designed for teenagers. Despite the move, a Conshohocken, Pa.-based prepaid debit card company hopes that by getting schools involved it can do a better job at distributing teen cards than have financial-institution issuers.

The nation's largest retailer is making headway in promoting the use of PIN debit over more costly forms of payment. But Wal-Mart Stores Inc. still is unhappy with the U.S. interchange system.

Pulse, which once prided itself as being the largest financial institution-owned electronic funds transfer network, earlier this year was acquired by Morgan Stanley's Discover Financial Services unit, joining other leading networks bought by public companies in recent years.

Bank of America Corp., the nation's largest issuer of debit cards tied to demand-deposit accounts, also has been one of the leading issuers of Visa-branded prepaid debit cards. The Charlotte, N.C.-based bank, however, is cooling on the prepaid trend.

Some debit card networks are modifying their interchange policies for low-cost transactions to address merchant concerns about pricing. Will others follow?

The personal identification number-based electronic benefits transfer card program has become the standard for delivering state and federal cash and food-stamp benefits. Indeed, the government last year stopped printing paper food coupons.

Smaller independent sales organizations and merchant deployers, already hit with flat or shrinking automated teller machine transaction volumes that generate surcharge revenue, probably also will see reductions in interchange revenue beginning in late 2005 if they do not upgrade their ATM fleets.