Debit Card - Wikipedia

 

 

There are currently three ways that debit card transactions are processed: EFTPOS (also known as online debit or PIN debit), offline debit (also known as signature debit), and the Electronic Purse Card System. One physical card can include the functions of all three types, so it can be used in a number of different circumstances. The five major debit card networks are UnionPay, American Express, Discover, Mastercard, and Visa. Other card networks are STAR, JCB, Pulse, etc. There are many types of debit cards, each accepted only within a particular country or region; for example, Switch (since merged with Maestro) and Solo in the United Kingdom; Interac in Canada; Carte Bleue in France; EC electronic cash (formerly Eurocheque) in Germany; Bancomat/PagoBancomat in Italy; UnionPay in China; RuPay in India; and EFTPOS cards in Australia and New Zealand. The need for cross-border compatibility and the advent of the euro recently led[dubious – discuss] to many of these card networks (such as Switzerland's "EC direkt", Austria's "Bankomatkasse", and Switch in the United Kingdom) being re-branded with the internationally recognized Maestro logo, which is part of the Mastercard brand. Some debit cards are dual-branded with the logo of the (former) national card as well as Maestro (for example, EC cards in Germany, Switch and Solo in the UK,[dubious – discuss] Pinpas cards in the Netherlands, Bancontact cards in Belgium, etc.). The use of a debit card system allows operators to package their products more effectively while monitoring customer spending.

Online debit system

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Online debit cards require electronic authorization of every transaction, and the debits are reflected in the user's account immediately.[1][2][4] The transaction may be additionally secured with the personal identification number (PIN) authentication system; some online cards require such authentication for every transaction, essentially becoming enhanced automatic teller machine (ATM) cards.

One difficulty with using online debit cards is the necessity of an electronic authorization device at the point of sale (POS) and sometimes also a separate PINpad to enter the PIN, although this is becoming commonplace for all card transactions in many countries.

Overall, the online debit card is generally viewed as superior to the offline debit card because of its more secure authentication system and live status, which alleviates problems with processing lag on transactions that may only issue online debit cards. Some online debit systems are using the normal authentication processes of Internet banking to provide real-time online debit transactions.

Offline debit system

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Offline debit cards have the logos of major debit cards (for example, Visa[5] or Mastercard). These cards connect straight to a person's bank account, but there is a delay before the money is taken out.

Electronic purse card system

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Smart-card-based electronic purse systems (in which value is stored on the card chip, not in an externally recorded account, so that machines accepting the card need no network connectivity) have been in use throughout Europe since the mid-1990s, most notably in Germany (Geldkarte), Austria (Quick Wertkarte), the Netherlands (Chipknip), Belgium (Proton), Switzerland (CASH), and France (Moneo, which is usually carried by a debit card). In Austria and Germany, almost all current bank cards now include electronic purses, whereas the electronic purse has been recently phased out in the Netherlands.

Prepaid debit cards

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Nomenclature

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Prepaid debit cards are reloadable and can also be called reloadable or rechargeable debit cards.

Users

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The primary market for prepaid debit cards has historically been unbanked people;[6] that is, people who do not use banks or credit unions for their financial transactions.[7]

In recent years, online payment fraud has surged dramatically[8]. Consumers frequently face account takeovers, phishing attacks, and data breaches at merchants where they use their standard bank or credit cards. Beyond these threats, the European Union has introduced stricter regulations on how and where citizens can spend their money[9]; a move many interpret as an infringement on privacy. To safeguard their real bank and credit card details, people are increasingly turning to disposable debit cards.

Advantages

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Advantages of prepaid debit cards include being safer than carrying cash, worldwide acceptance, not having to worry about paying a credit card bill or going into debt, the opportunity for anyone over the age of 18 to apply and be accepted without checks on creditworthiness, and the option to deposit paychecks and government benefits directly onto the card for free.[10] A newer advantage is the use of EMV technology and even contactless functionality, which had previously been limited to bank debit cards and credit cards.

Risks

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• If the card provider offers an insecure website for the cardholder to check the balance on the card, this could give an attacker access to the card information.
• If the user loses the card and has not somehow registered it, they will likely lose the money.
• If a provider has technical issues, the money might not be accessible when a user needs it. Some companies' payment systems do not appear to accept prepaid debit cards.[11]

Types

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Prepaid cards vary by the issuer company: key and niche financial players (sometimes collaborations between businesses); purpose of usage (transit card, beauty gift cards, travel card, health savings card, business, insurance, etc.); and regions.

Governments

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As of 2013, several city governments (including Oakland, California,[12] and Chicago, Illinois[13]) are now offering prepaid debit cards, either as part of a municipal ID card (for people such as illegal immigrants who are unable to obtain a state driver's license or DMV ID card) in the case of Oakland or in conjunction with a prepaid transit pass (in Chicago). These cards have been heavily criticized[14][15] for their higher-than-average fees, such as excessive flat fees added onto every purchase made with the card.

The U.S. federal government uses prepaid debit cards to make benefit payments to people who do not have bank accounts.[16]

In July 2013, the Association of Government Accountants released a report on government use of prepaid cards, concluding that such programs offer a number of advantages to governments and those who receive payments on a prepaid card rather than by check. The prepaid card programs benefit payments largely for the cost savings they offer and provide easier access to cash for recipients, as well as increased security. The report also advises that governments should consider replacing any remaining cheque-based payments with prepaid card programs in order to realize substantial savings for taxpayers as well as benefits for payees.[17]

Impact of government-mandated fee-free bank accounts

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In January 2016, the UK government introduced a requirement for banks to offer fee-free basic bank accounts for all, which had a significant impact on the prepaid industry, including the departure of a number of firms.[18]