Ron Congemi, First Data Corp.’s new senior vice president of strategic industry relations, says that ISOs should be concentrating on PIN-enabling merchant credit card terminals because the trend of increasing debit will continue and use of checks will continue to decline.
    In his new role, Congemi is responsible for building and maintaining relationships with key clients, associations, industry stakeholders and organizations.
    Congemi had operated First Data Debit Services and the STAR Network following the Concord EFS acquisition in 2004. Previously, Congemi was senior vice president of Concord EFS, Inc. and president of Concord's Network Services segment, with management responsibility for the STAR network.
    The number of paper checks is declining about six percent per year, a trend that started at the beginning of the century and will continue into the foreseeable future, according to Congemi. However, he doesn’t expect any major merchant to follow the trend of Canada’s second largest supermarket chain, which stopped accepting checks in 2004.
    The chain notified customers for a year before the change was implemented. The chain was able to make the change to lower-cost debit because the number of checks had declined faster and debit had caught on more quickly than it has in the U.S., according to Congemi.
    But debit is starting to catch on now, so Congemi wouldn’t be surprised that a large merchant in this country, such as Safeway or Albertson’s, would follow suit within the next five to six years.
    Even before such a change, Congemi expects further electronification of checks, increased micropayments and increasing use of PIN debit on the Internet. He points out that the Federal Reserve reduced it’s item processing capabilities by one-third in the last two years and will further reduce it by another 20% in the next two years.
    As item processing shrinks, those continuing to process checks will see higher costs. So banks will look to move merchants away from increasingly costly checks and to lower cost debit, Congemi says.
    “The leading acquirers are doing more PIN-based debit,” Congemi says, adding that he expects to see more compression of the rate differences between signature-based and PIN-based debit.
    Congemi also says that he continues to see more use of PIN-enabled debit in the STAR network, which he attributes to a combination of the network’s reduction of interchange fees and lowered rates to quick service restaurants.
    Beyond quick service restaurants, which are still in their infancy in terms of card acceptance, Congemi sees opportunities for ISOs in the medical co-pay arena. Medical co-pays have largely been the purview of checks and cash, but the ISOs who can show the benefits (quicker access to cash, no bounced checks) of card payments can do well in this area, according to Congemi.
    Congemi expects to see more use of card-based micropayments on the Internet, but only if the charges can be reported and reconciled in a batch method. For example, it’s too cumbersome to report and approve for payment 200 songs downloaded to an iPod for 99 cents apiece.
    By educating merchants to their different payment options and expenses, ISOs can build a better, loyal customer base. However, ISOs who want to simply profit from leasing terminals probably won’t go this route, Congemi says.