We recently read a survey which revealed that debit card processing is growing more popular than online credit card processing for e-commerce payments. We provide secure services for both methods at Instabill, as debit cards are the preferred method in many regions, including several countries throughout Europe.
With this shift, we’re getting different messages:
- Consumers want direct purchases to their bank accounts, so that their account balances are accurate in real time.
- Consumers are budgeting and watching their finances closer, obviously a good thing
- Finally, US consumers are choosing convenience over safety (we’ll explain).
Considering the current e-commerce climate, consumers favoring debit card payments is surprising. Nevertheless, both methods have advantages and downsides (to varying degrees).
The case for debit card payments
Debit card processing is not only trumping online credit card processing as the preferred method of payment of U.S. consumers, but it has been the preference for years in certain European countries such as France and Germany. Debit cards are an excellent method of payment for consumers who adhere to a strict budget and those who have limits as to how much they are willing to spend. Transactions are immediate, direct to your bank account without the clearance period that paying for goods with a credit card has.
The one colossal flaw with debit cards (and it’s a big one)
The convenience of debit card processing is also its biggest flaw: the transaction is direct to a consumer’s bank account.
Let’s go back to 2014 and 2015, when data breaches began to hit a fever pitch. This means the fraudsters who attacked Target, Home Depot and Sally Beauty, had the banking information of millions of consumers, since debit card purchases lead directly to the consumer’s bank account. In cases of such, it can take weeks the replace the money stolen from a bank account. With data breaches so common, the risk of using debit cards for online purchases is significant.
Online credit card processing: the secure solution
It’s a simple fact: when a consumer’s credit card has been compromised in a data breach or a case of fraud, it’s the credit card issuer’s problem, not so much the consumer’s. Sure, in cases of friendly fraud, there are inconveniences:
- The victim may need to argue and prove that s/he did not purchase the goods with which they were charged (the merchant does not want the chargeback).
- Additionally, the consumer is forced to wait for his/her card issuer to ship a new credit card.
In October of 2016, we attended the Money 20/20 tradeshow in Las Vegas, where consumer identity theft expert Frank Abagnale (of Catch Me if You Can fame) spoke about his preferred methods of payment – the credit card, for the same reasons listed above. In his powerful keynote address, we found one quote particularly gripping:
“It’s ridiculous to think your identity has not been stolen. Every piece of information leads to another piece of information.”
Data breaches are alive and well
We mentioned the rash of data breaches over 2014 and 2015 – which haven’t stopped. Frankly, data breaches are so common, they barely make headlines anymore. Those that do are usually happen to big box retailers, health care providers or other major brands that only account for less than 20 percent of all incidents. The hacking of small businesses is far more common.
It’s why Europe has mandated the PSD2 and General Data Protection Regulation (GDPR) movements – to mandate businesses that hold consumer information to protect it at all costs or be subject to a substantial fine.
Online credit card processing with Instabill
When we board a merchant for one of our online credit card processing solutions, we link them with the best domestic or offshore banking partner best suited for their industry. Upon approval, the merchant connects their website to the secure payment gateway of our banking partner. Additionally, Instabill merchant account managers remain as your consultants throughout our merchant account relationship.
Our experts are on hand Monday through Friday from 8 a.m until 6 p.m. U.S. eastern time at 800-530-2444.