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| Will PIN Debits' security result in Signature Debit disappearing in a Puff of Smoke? "From a pure technical security standpoint, PIN is much more secure," Avivah Litan said. "There's no two ways about it." |
In a post last week, entitled "Dead Debit Walking" I mused that the combination of both the Durbin Amendment and the August 15th effective end of overdraft charges would leave banks without the recurring income that has justified pushing the less secure signature debit over the more secure PIN Debit.
My thoughts were that the disappearance of billions in overdraft and interchange fees would (more than likely) lead to the eventual demise of signature debit. (and the advent of Chip and PIN in the USA)
Also see: Does Durbin Amendment Position "PIN Debit" as "Signature Debit" Killer? I admit that I didn't think it would begin to happen as early as a week later, but...
...yesterday American Banker reported that Bonneville Bancorp, in an industry first, has announced that it is prohibiting signature debit in some states and posted a notice on their website. "No signature transactions will be allowed," the notice asserts
Oh, and by the way...I believe I am also spot on with my assertion that online banking authentication must be done with a peripheral device and concur with the recent quote by Eugene Kaspersky, co-founder of Kaspersky Labs when he called for "mass adoption of peripheral card readers for all internet banking users"
Here's a snippet from American Banker on the Beginning of the End of Signature Debit:
Fraud Woes Prompt Bank to Forego Signature Debit Revenue
<Bonneville Bancorp is taking an unusually drastic — and seemingly counterintuitive — approach to fighting fraud. To make sure its customers use their PIN codes, shoring up security for debit purchases, it is prohibiting signature debit payments in some states. Though PIN codes provide an additional layer of security, signature debit transactions generally earn issuers more money, and observers say it is unheard of for a bank to consider its fraud losses severe enough to switch off that revenue stream. According to a notice on Bonneville's website warning of "high amounts of fraudulent card activity in California, Florida and Georgia," customers in those states must use their PIN codes for any debit transactions. "No signature transactions will be allowed," the notice asserts. "All I can think of is that the fraud was so high that the lost interchange revenue is worth it compared to the cost of issuing new accounts," said Avivah Litan, a vice president and distinguished analyst at the Stamford, Conn., market research company Gartner Inc. "It's a statement admitting PIN is more secure, so it contradicts all the marketing messages" from most other banks.
From Peter Guidi 
Director, Petroleum Sales at VCMG
- Fort Myers, Florida Area Retail John B. Frank adds excellent commentary on the impact of the Durbin Amendment joining with those who see the imminent death of signature debit as one early results of the legislation. His perspective is enlightening.
" The writing is on the wall. The recent passing of the Durbin Amendment signifies the "future passing" (demise) of signature debit. Here's why: The two biggest reasons signature debit existed in the first place have now been eliminated...
- Reason Number 1: It created recurring revenue to banks in the form of overdraft charges
- Reason Number 2: It created recurring revenue to banks in the form of higher interchange fees.
Read more: http://pindebit.blogspot.com/2010/08/beginning-of-end-of-signature-debit.html#ixzz0x4gAp88T
