DENVER -- In a keynote address designed to mark debit point of sale's emergence as a significant payment option, the president of the nation's largest debit transaction processor offered a bold prediction at a conference here:

"We predict checks and credit Lcarus] to remain virtually flat through the year 2000," said Michael Douglas, president and chief executive of Buypass Corp., an Atlantabased unit of ElecIronic Payment Services Inc.

He added, "We anticipate a major movement away from cash toward debit and smart cards."

The implication of his statement that familiarity with debit is reaching a point at which consumers will opt for it instead of other payment options was clear to the 400 bankers and vendors gathered for the seventh annual Faulkner & Gray's PUS Today conference.

This type of prediction is nothing new to those with a few years' experience in electronic banking.

As far back as the 1970s, conventioneers have talked about a time when debit would emerge to form the basis for a cashless society.

However, despite this history of fruitless talk, even the most hard-bitten observers are listening with interest these days to predictions such as Mr. Douglas.

The reason for this is simple: debit is finally showing concrete signs of becoming the payment option so many have expected.

According to POS News, Faulkner & Gray's Chicago-based newsletter, the number of debit terminals more than doubled in the year ending June 1994 to 343,959. Meanwhile, the number of monthly on-line debit transactions rose from 32.2 million to 51.2 million.

Several speakers at this conference highlighted these facts, while trying to point out obstacles that still face those involved in the debit business.

Paul Martaus, president and chief executive of Martaus & Associates, joked that the twoday conference celebrated "the 20th anniversary of debit being fight around the comer." But he quickly shifted gears to demonstrate that debit has actually arrived as a viable payment option for consumers.

Nearly every major regional network has become involved in debit point of sale, he noted. As such, consumers in most parts of the country can use their debit cards to make purchases.

However, since about 78% of the debit point of sale terminals in the Unite.d States are in either supermarkets or gas stations, use of the cards has been somewhat limited.

The challenge then, as defined by the conference's 'theme "Out of the niche and into the mainstream," is to find new homes for debit point of sale in other areas of retailing, such as department stores, gift shops, fast food restaurants, and small businesses.

The last-mentioned category, Mr. Mariaus said, is largely the domain of credit cards; only 1.58% of stores accept debit cards for purchases. Conservatively speaking, 2.5 million locations are left untapped by debit.

Independent sales organizations are largely responsible for debit's penetration into these businesses so far, and Mr. Martaus believes that cooperation between the networks and ISOs will greatly help debit's continued expansion.

The regional networks "hold the key to the car. Without their support, debit POS is not going to expand very rapidly," he said. "The problem is that these guys don't want to work with independent sales organizations."

The lack of past cooperation between ISOs and networks springs largely out of an industrywide suspicion of the sales organizations' business ethics.

Observers said many ISOs have a reputation for undermining long-term relationships between merchants, banks, and networks by trying to milk shortterm windfalls from hardware and service sales.

This situation is slowly changing, however, as more ISOs come to realize the benefits of longterm relationships with banks and networks.

In a conference session devoted to ISOs, Stephen Demaree, a senior vice president at First Tennessee Bank offered his experience with one particular ISO as proof that such relationships can work to the advantage of all parties.

He pointed out that BanCard Inc., a Boulder. Colo.-based ISO. receives service ratings from merchants that are comparable to the ratings coming from First Tennessee's own merchant services personnel.

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