PIN Debit Wins Give MasterCard Transaction’s Volumes a Boost

by Sarah Grotta 0

It’s quarterly earnings report time which can provide some really interesting data. Digital Transactions highlighted news in Mastercard’s announcement on Friday regarding the growth of their PIN debit business:

The No. 2 payment network on Friday reported that it processed 14.5 billion transactions globally in the third quarter, up 17.7% from 12.3 billion a year earlier. The transaction growth rate was up 4 percentage points from the second quarter and was “driven primarily by increased PIN-routing in the U.S.,” chief financial officer Martina Hund-Mejean said in a morning conference call with analysts.

This is a particularly significant increase in PIN transactions in light of the fact that MasterCard lost one of its largest debit clients, USAA who is currently in process of replacing its Mastercard debit card with Visa cards in tandem with its EMV migration. The growth trend in Mastercard PIN’ed transactions is part of are larger debit routing shift that is taking place. Earlier this year I discussed many of the influences on debit routing in a report, 2016 Annual U.S. Debit Market Data Review. That report summary can be found here.

Two influential changes that are impacting the growth of PIN include merchants’ more sharpened focus on routing optimization that will often lead to merchants’ choice of a PIN network over signature. Also at play here is the phenomena that occurred in the early days of the EMV migration in debit. Visa debit issuers, not wanting to wait to for the U.S. Common Debit AID technology to be ready, chose to pair their Visa branded debit card with the MasterCard PIN network. This allowed banks and credit unions to move forward with their issuance plans and to comply with Durbin requirement that debit cards must have two unaffiliated networks available.

In two examples, MasterCard recently expanded its relationships with two big debit card issuers, Minneapolis-based U.S. Bancorp and Birmingham, Ala.-based Regions Financial Corp. The agreements include “preferred MasterCard routing for their PIN-debit businesses,” president and chief executive Ajay Banga said on the call. Both banks also are Visa issuers.

Overview by Sarah Grotta, Director, Debit Advisory Service at Mercator Advisory Group

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