It is useful to distinguish between the frontline participants or “users” in an ATM transaction or a debit card transaction and the components of the underlying infrastructure.
In an ATM transaction, users are the consumer, the card-issuing bank, and the ATM owner.
In a debit card transaction, users are the consumer, the card-issuing bank, the merchant, and the merchant’s bank. This section describes the infrastructure components of ATM and debit card transactions.
This infrastructure provides many services that are typically unseen or unnoticed by consumers and merchants and ensures that a transaction is appropriately authorized and processed. The infrastructure of the ATM and debit card industry comprises three main components: EFT networks, offline debit card networks, and third-party service providers.
EFT Networks
EFT networks are the telecommunications and payments infrastructure linking consumers, ATMs, merchants, and banks. The physical components consist of ATMs, POS terminals, telecommunication connections, apparatus that route transaction information to appropriate parties, and computers that store deposit and transaction information. Two characteristics of an EFT network distinguish it from other payments systems that may use similar physical components. First, transactions are PIN-based. Second, consumer accounts are immediately debited (funds are immediately transferred from demand deposit accounts).9 There are two types of EFT transactions. The first are ATM transactions. The second are online debit transactions at POS terminals.
EFT networks can be used for either ATM transactions or online POS debit card payments or both. In practice, most EFT networks 6 A Guide to the ATM and Debit Card Industry process ATM transactions, and a subset of these also processes POS transactions. A few EFT networks have been devoted solely to POS transactions. EFT networks are typically separated into two types. Regional EFT networks serve specified regions of the United States.
There are three large regional networks: NYCE, Star, and Pulse. The NYCE network serves primarily the Northeast and Midwest, Star serves the West and the midsouth Atlantic regions, and Pulse serves the Central and Southern regions. Today it is something of a misnomer to call these large networks regional because they have grown to the point of near-national coverage. Examples of smaller regional networks include Shazam, located primarily in the Midwest, and Presto, serving the Southeast. National networks are fewer in number than regional network but are distinguished by their national territory.
National territory does not necessarily translate into large size. The Armed Forces Financial Network is comparable in size to some of the larger regional networks, but its mission of serving the armed forces community leads it to a national geographic territory. Visa and MasterCard operate EFT networks that are truly national in size and territory. Each uses its own physical infrastructure to run ATM and POS transactions, and for marketing purposes their ATM and POS networks carry different names. Visa’s Plus and MasterCard’s Cirrus are ATM networks, while Visa’s Interlink and MasterCard’s Maestro are POS networks.
Another important distinction for national networks is that they may serve as a bridge between regional networks. If a transaction conducted on a regional network is initiated using a card from another regional network, a national network may link the two regional networks so that the transaction information may be routed from one regional network to the other. In a sense, national networks serve as networks of networks.10 There are many types of ownership and membership structures among EFT networks.
A single bank may own a shared network, but ownership by multiple banks is more common, a legacy of the fact that many of the first shared networks were typically joint ventures among banks. Some of these joint ventures included many banks, while others had a few. Nonbank ownership of networks ranges from complete ownership of the network (as with Concord EFS’s Star network) or as a joint venture with banks (such as First Data and NYCE). Membership in an EFT network is typically limited to financial institutions (banks, savings institutions, and credit unions) and can be, but is not necessarily, tied to ownership.
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