After years of lagging the trendsetters in California, northeastern consumers and retailers are finally picking up the debit card pace.
Some people close to the electronic banking and point of sale industries are boldly predicting. that the Northeast could surpass the West Coast in supermarket debit volumes in as little as six to eight months.
While debit cards have just begun to catch on in the New York region, supermarkets and other retailers in the West have been nurturing a direct-debit market for more than half a decade.
One-Fifth the Volume
NYCE, the predominant automated teller machine network in the New York region, handles about one million point of sale transactions per month.
NYCE's counterpart on the West Coast, San Diego-based Star Svstem Inc., processes about five times that amount.
Even though-NYCE's monthly transaction growth rate of 10% is just slightly above Star System's 8%, supermarkets in the West have become far more "mature" as a debit market than the relatively untapped Northeast.
Star Network Branching Out
"The volcano is about to erupt," said Joan Savarese, vice president of marketing for NYCE, which is based in Hackensack, N.J.
About one-fifth of the 25 million debit card transactions that Star System processes each month are initiated at the point of sale, according to Nikki Waters senior vice president of marketing. Like all such regional networks, Star still deals mainly with ATM transactions.
The network counts 55,000 terminals at 25,000 locations that include gas stations, fastfood restaurants such as Burger King and Carl's Jr., and even some private professionals and retail boutiques.
|Pretty Well Entrenched'
"We have penetrated the grocery store industry heavily, and we're pretty well entrenched," Ms. Waters said.
She added that Star has lately been focusing its efforts on other retail segments, like hardware stores.
By comparison, the NYCE network appears to have just gotten its feet wet in the wide-open market of supermarket debit.
NYCE has 25,000 point of sale terminals in place and only about one in every 18 of its debit transactions occurs at the point of sale.
|Pre-Embryonic Stage'
"The New York terminals are in the pre-embryonic stage," said Lewis N. Pergament, an entrepreneur who expects to play a role in the coming advance.
Within the next year he expects his company, Transaction Network Plus, to be running about 15,000 point of sale terminals from Maine to New Jersey.
Mr. Pergament is senior vice president of the company, an independent processor of credit and debit card transactions. It is a subsidiary of Diversified Investors Corp.
To increase public awareness, NYCE recently launched a marketing campaign aimed primarily at supermarket and gas station customers. The network's advertising should increase in the fall.
"We've had some good success in cooperative advertising with 30-second television commercials to educate consumers," Ms. Savarese said.
Two NYCE spots, which began their run in 10 northeastern metropolitan markets in June, illustrated consumers' ability to use debit cards in supermarkets or gas stations.
In some ads, NYCE has mentioned its partner financial institions and retailers.
A Matter of Convenience
Point of sale terminals - enabling consumers to pay for their purchases with ATM cards - began appearing in supermarkets on the East Coast around 1990.
This direct transfer of funds from the purchaser's account to the merchant's is sold to the consumer as a convenience - there is less need to carry cash.
But supermarkets also benefit - from fast and certain payment. And, once convinced, they become the most influential selling agents to consumers.
"It's like putting an ATM on the checkout line," said Chris Farrow, vice president for finance at the Waldbaum's supermarket chain in New York.
"You can charge a chicken and take out cash at the same time."
"The integration of debit at the retail point of sale is where a lot of focus on banking is headed," according to Charles B. Keil, senior vice president of Chemical Bank New Jersey.
Through an agreement with NYCE and the Chemical Banking Corp. subsidiary, Waldbaum's this year became one of the first supermarket chains in the Northeast region to offer a full-scale card-accepting service. Many of its terminals also accept Visa, MasterCard, and Discover cards.
Waldbaum's finds the competition already is growing. King Kullen, Pathmark, and - most recently - the Purity chain have also made the service available in some of their stores.
Expanding the Service
Mr. Keil said Chemical Bank New Jersey plans to roll out the service to terminals in restaurants and laundromats, on buses. and for telephones and even public fax machines.
Mr. Pergament said Transaction Network Plus has begun negotiations with Yankee 24, the major shared ATM network in New England, to link their systems and extend debit card services into Connecticut and lower Massachusetts.
The servicing company also has entered talks with a major Long Island department store.
Mr. Pergament said his firm is pursuing 150 to 200 prospects for its terminal service - from gas stations and convenience stores to department stores, upscale clothing shops, and restaurants.
"Bankers for years have been talking about a cashless society," said Mr. Pergament.
"This is finally the beginning of the revolution."
