A) WHAT IS OFFLINE TRANSACTION
1. An offline transaction, also known as
a signature debit transaction, is a payment method that uses a debit card to
transfer funds from a checking account to a merchant across a digital credit
card network.
B)
HOW IT WORKS (EXAMPLE):
1. When you pay for goods or services
with your debit card, you have the option to process your payment in one of two
ways:
i)
As
an offline transaction via a credit card processing network, or
ii)
As
an online transaction via an electronic funds transfer (EFT) system.
2. Offline transactions are processed
much like credit card transactions.
3. They are sent over one of the major
credit card networks -- Visa, MasterCard, Discover, etc -- depending on which
credit card network your bank is associated with as a member bank.
4. The cost of the transaction, called
an "interchange fee," is typically 2-3% of the total purchase. The
interchange fee is charged to the vendor/merchant, not the bank.
C)
WHY IT MATTERS:
1. USD 20.5 billion in interchange fees
were charged to merchants in 2010.
2. Now they are at the centre of debate
among lawmakers, banks and merchant unions in the U.S. On one side of the
argument are the banks, which claim the interchange fees are necessary to cover
the costs of processing transactions and providing fraud protection.
3. On the other side are the merchants
and vendors, who claim the rising interchange fees are increasingly cutting
into their profits, forcing them to raise the prices of their goods and services!
4. In July 2010, the Dodd-Frank Wall
Street Reform and Consumer Protection Act were passed by Congress, and included
in the Act was an amendment to address interchange fee reform (the Durbin
Amendment).
5. Under this amendment the Federal
Reserve is now authorized to review and reform debit card transaction
fees.
6. One such proposal will cap
interchange fees at $0.12 per transaction, a 73% reduction from the average
charge of $0.44 per transaction.
7. As a consequence, consumers can
expect a loss of financial perks like free checking accounts, the end of
rewards programs for debit cards and an increase in fees for ATM withdrawals
from out-of-network banks.
8. If interchange fee reform is not
passed, the cost of the fees will be borne by the consumer, as merchants continue
to increase the prices on their goods and services to make up for profits lost
to fees.
D) OFFLINE DEBIT
1. Unlike online debit transactions,
offline debit payments do not involve PINs.
2. Offline debit cards (or check cards)
are typically issued by credit card companies through their participating
banks.
3. The cards may be used everywhere
credit cards are accepted, including over the Internet.
4. In the physical world, customers who
choose to make offline debit purchases must hand over their check cards.
5. Merchants swipe the cards through
their payment terminals and complete the debit sales the same way they process
credit card transactions.
6. The customers then sign sales drafts
that authorize the merchants to charge their accounts.
7. On the Web, customers enter check
card information into browser-based forms, just as they would for credit card
purchases.
8. The data is encrypted, captured by
transaction processors and sent to the credit card processing networks for
authorization. Transactions normally settle in two to three business days.
9. Because check card transactions are
processed through the same networks as credit cards, they often incur the same
discount rates and transaction fees.
10.
If
your business is already equipped to process credit card transactions (for
instance, you have a merchant account, a credit card processing service and
either a terminal and printer or payment-processing software), you should also
be able to process offline debit payments.
E) DEFINITION of 'Offline Debit Card'
1. A card that combines characteristics
of both a traditional (online) debit card and a credit card, allowing the
cardholder to pay for goods and services directly from his or her bank account.
2. As with a traditional debit card, a
transaction using the offline debit card creates a debit against the
cardholder's bank account.
3.
But unlike with a traditional debit card, a Card PIN Number is NOT required during the transaction - all that is
required is the user's signature. These cards are generally issued by credit
card companies in association with the bank in which the account is held.
#Shared By MKR#
