After only two years in the business, the dominant electronic banking network in Puerto Rico is experiencing the kind of debit point of sale usage for which networks on the mainland yearn.

Banco Popular de Puerto Rico, the $11 billion-asset bank that owns and operates the ATH network, said consumers use debit cards for nearly 10% of the purchases they make at island stores that accept cards. Just over 2% of purchases at these store are made with credit cards.

High Hopes

The total, 12%, could readily be raised to 20%, said Richard L. Carrion, president and chief executive of Banco Popular. That "would be substantially above most electronic POS programs," he added.

On average, mainland merchants with electronic POS programs are taking in 3% to 5% of their point of sale payments on debit cards, experts said.

Electronic banking networks are eager to boost that percentage so that more transactions will run through their networks. Network revenues are largely based on transaction traffic.

In addition to operating a POS network and providing merchant services, ATH also provides ATM-driving and credit-and-debit-transaction switching services.

Mr. Carrion recognizes that some of ATH's success with POS debit is rooted in the fact that the program operates in an isolated market in which his network is clearly dominant.

Says Planning Pays

"We are operating on an island -- which has helped," he said. "But we really laid out where we want to go in terms of how we could get the program going, and it has worked fairly well."

The core of Banco Popular's debit POS strategy was to gain a foothold first at the island's large supermarkets. Since consumers tend to return week after week to the same supermarkets, the bank felt these were the most likely locations to generate a lot of usage.

"Initially, we were looking for a places with a lot of recurring traffic, so people would anticipate that the terminals were there and plan to use them," said Mr. Carrion. He noted that the bank used the same rationale for its placement of off-premises automated teller machines.

Once usage began to rise in the supermarkets, ATH -- which stands for A Toda Hora, meaning at all hours -- quickly moved to place terminals in other merchant locations to capitalize on the name recognition that the supermarket terminals had generated.

In April 1992, ATH installed the first debit-accepting terminals in about 75 supermarkets. By yearend, the network was handling 50,000 monthly debit transactions.

Today, the bank has installed terminals in 1,700 merchant locations, and monthly debit traffic has grown to about 300,000 monthly transactions.

By the end of this year, Mr. Carrion predicts there will be 4,500 terminals in 3,500 stores, which would give ATH near complete dominance of POS business in Puerto Rico.

ATH's experience confirms what regional networks have believed all along: if consumers are confronted with enough POS terminals, they will begin to use them.

"The biggest hurdle for debit POS is not consumer acceptance, it's terminal coverage," said Richard Speer, chairman of Speer & Associates, a consulting firm based in Atlanta.

"[ATH's program] is an example of what aggressive terminal placement can do."

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