Boston, MA
December 2006

EFT/ATM Network Processing Review: Purchasing Services, Building Volume


Mercator Advisory Group is pleased to announce that its review of the major EFT and ATM processors’ offerings to financial institutions is now available. This report examines debit processing, the significant cost differences between PIN debit and signature debit, and the impact of rewards programs on issuers, merchants and the consumer. The report examines how processors approach selling card processing, ATM services and driving, reporting and data mining, security and fraud management and reward program. The uptake by financial institutions of these services is also discussed.

The report focuses in particular on the services offered to the small and medium sized bank markets, segments where these large vendors strongly compete. The discussion includes the processors’ go-to-market approach and the range of capabilities offered. This review finds a surprisingly narrow range of competitive differentiators employed by processors to distinguish themselves in a business where the customer is focused tightly on transactions costs.

Card processing pricing is reviewed showing the remarkable range of transaction costs charged to small FI organizations. This complexity shows the need for FIs to fully understand the smorgasbord of pricing options brought to them by competing processors.

The report addresses underutilized services that would benefit smaller financial institutions. These services include security and fraud management as well as debit-backed rewards programs.

The report contains a discussion on the role of the ATM in bank operations and the prospects for deployment of advanced ATM functions.

Highlights of the report include:

  • The range of debit processing cost paid by small FIs to processors ranges by 304%.

  • Debit-based rewards programs can positively impact debit cardholder activation by 14% or more, increasing monthly spend by 13% and increase monthly spend per card by 13%.

  • A well managed program optimizing both PIN and signature debit usage can improve transaction volumes per card to 22.7 from 10.0 for PIN only and 14.4 for signature only.

  • The differences between signature and PIN debit pricing along with the increase in card usage by consumers show that there is margin both to fund rewards programs and improve ROI.

“Processors are out ahead of their customers in at least two areas that impact cost and revenue: fraud management and debit-backed rewards programs,” comments George Peabody, Research Manager of Mercator Advisory Group’s Debit Advisory Service. “While debit-based rewards programs have enjoyed uneven uptake by bank customers, the numbers plainly show that these efforts are worthwhile both in terms of accountholder retention and profitability. They are not just a revenue-neutral exercise.”

One of the 12 Exhibits included in this report.

This report is 27 pages long and contains 12 exhibits.

Members of Mercator Advisory Group have access to this report as well as the upcoming research for the year ahead, presentations, analyst access, and other membership benefits. Please visit us online at

For more information call Mercator Advisory Group’s main line: 781-419-1700 or send email to