Interlink Strategy is Now Bearing Fruit

  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.
  Indeed, Interlink for the first time surpassed its rival and long-time industry leader, First Data Corp.'s Star network, in purchase volume, making Interlink the nation's top POS-debit network, according to the 2006 edition of the ATM&Debit News EFT Data Book. ATM&Debit News is a C&P sister publication also published by SourceMedia.
  The data book shows that in-network POS-debit volume among the nation's electronic funds transfer networks grew 29.3%, to 676.2 million transactions in March from 522.8 million in March 2004. POS-debit volume grew 25.3% in March 2004 from the previous March (see chart, page 26).
  Despite the relatively high industry growth rate, Star's March POS-debit volume declined. Star cardholders in March initiated 225 million purchases, down 7.7% from 243.8 million in March 2004. In contrast, Interlink volume increased 110.2%, to 238.6 million in March from 113.5 million in March 2004.
  No other POS-debit network came close to matching Interlink's growth. Interlink in March handled 35.3% of all PIN-based POS debit transactions. In March 2004, Interlink had only a 19.7% market share. Star, which in March 2004 had a 46.6% share of the POS-debit market, now has just a 33.3% share, according to the data book.
  Perhaps the single-biggest factor in Interlink's fast rise is its new status among many issuers as the preferred POS-debit network. Over the past two years, for example, Interlink replaced Star as the go-to POS-debit network provider for San Francisco-based Wells Fargo & Co., and Charlotte, N.C.-based Wachovia Bank and Bank of America, the nation's largest debit card issuer. Moreover, there is widespread speculation that Bank One, now owned by New York-based J.P. Morgan Chase & Co., will migrate the POS-debit function of its debit card portfolio to Interlink from Star.
  All of these financial institutions are among the top-10 issuers of debit cards, according to the data book.
  It took more than a year for most of those issuers that defected from Star to reissue their debit cards with the Interlink mark. Visa's emphasis on going after the largest issuers is now paying off, says Dave Lott, analyst for Atlanta-based Collective Dynamics LLC consultancy. "They (Visa) are really starting to receive the fruits of their efforts," he says.
  Visa also is benefiting from existing relationships with its association members, such as Wells and BofA, says Tony Hayes, vice president of Boston-based Dove Consulting, which recently was acquired by Hitachi Consulting Inc. Visa has paid millions to association members to entice them to switch to Interlink, Hayes notes.
  That strategy contrasts with First Data's EFT network strategy, which was to gain network market share through its purchase of Star. "If you look at the other networks, their growth came through mergers," Hayes says. "Interlink grew by attracting large issuers."
  Interlink is unlikely to sustain its growth rate of the past year in the year ahead, but it will continue to grow its PIN-debit transaction volume at a rate above the national average, predicts Jeff Sachs, Visa senior vice president for consumer debit services. "It is not realistic to assume we are going to achieve that level of growth in the coming year," Sachs says. Interlink volume grew by 14.9% in the second quarter compared with the same period last year.
  Star officials could not be reached for comment on the data book's findings. But network officials previously told ATM&Debit News that the network does not expect any more significant defections from Star.
  Star, meanwhile, remains the top EFT network in terms of combined ATM and POS-debit transaction volume, according to the data book. The network switched 293.7 million transactions in March, down 9.2% from 323.5 million in March 2004 (see chart, page 22).
  Lott says he expects First Data to become more competitive with Visa in shoring up its POS-debit transaction volume in the coming year.
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