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Choosing the Right Networks for Your Debit Card Program

Article contributor / Christine Lopez, SVP, SHAZAM Payments Network

Everyone knows KYC, Know Your Customer, however, one should KYN, Know Your Network! Knowing your networks helps your financial institution determine the income your debit cards generate and if you are leaving net interchange income on the table.

The Global Networks

First there is the global network you choose for the front of the card. This is typically Visa® or Mastercard®. The industry refers to them as global networks because they are recognized and accepted around the world. For example, if one of your cardholders goes overseas to explore the jewels of Alpine Europe, a merchant in any of those countries will recognize the network on the front of the card as the only network they can route the transaction to.

But for debit cards, the global network is only half of the story.

The Unaffiliated Debit Networks

An unaffiliated network, such as the SHAZAM Payments Network, is the payment network on the back of debit card that is unrelated to the front-of-card payment network.

Regulation II, commonly referred to as the Durbin Amendment, requires two unaffiliated networks on debit cards. For example, the card issuer has Mastercard and SHAZAM network on their cards. The back of the card will have the global PIN network, Maestro®, which is affiliated with the global network on the front of the card. The unaffiliated debit network on the back of the card would be the SHAZAM Payments Network. Having these two networks mean the card issuer is compliant.

Last year’s clarification to Regulation II states all debit card issuers must enable two unaffiliated debit networks for electronic debit transactions. This provided debit card transaction routing choice across a wider range of transactions such as online shopping, fuel pumps and full-service restaurants. These message types are referred to as dual message transactions or SHAZAM Elite Pass® transactions. This message type is used when the authorized amount is not the same as the final purchase amount.

Why the Right Combo Matters

The unaffiliated debit network you choose for your cards will impact your income stream every time your cardholders use their card. This income comes from the interchange you earn with each transaction, and not all debit networks offer the best net interchange revenue.

In addition to setting interchange rates, each network, SHAZAM included, sets their own network fees card issuers pay on transactions routed by the merchant across that network. This results in different net interchange income for the issuer.

Every financial institution should be asking themselves about the motivations of their networks.

  • Does the network only look at lining their pockets?
  • Do they want to win transactions at all costs?
  • Do they consider the financial impact on your bottom line?

As the card issuer, the networks you choose determine how merchants will route your cards’ transactions. Once you know your networks, you can choose the right ones to maximize your financial institution's revenue.