Hannaford Finds PIN Debit Is Now As Expensive As Checks

Despite the vaunted efficiencies of electronic transactions, at least one regional supermarket chain has found its cost to accept PIN debit transactions is running close to its acceptance costs for paper checks. As a result, says Bryan Croteau, senior business analyst for Hannaford Bros. Co., Portland, Me.,”I don't want to discourage paper checks.” Speaking this week at a conference in Fort Lauderdale, Fla., organized by NACHA, the rules-setting organization for the automated clearing house, Croteau said supermarket PIN debit fees have more than doubled since 2000, undercutting the value of the payment channel to Hannaford, which began accepting PIN debit in the 1980s. “We were an early adopter, and PIN debit was quite a value,” he said. “Unfortunately, it's not the value it once was.” Croteau's sentiments seem to run counter to those of many processors, banks, and retailers, which are seeking to replace paper transactions with electronic payment methods. But, while he won't reveal actual costs to Hannaford, Croteau says a “hypothetical” supermarket chain is paying just over 34 cents to accept a PIN debit transaction, figuring in network interchange, cost of cash back, front-end labor, back-office expenses, and fraud losses. The corresponding cost for a check is just over 33 cents, he says, while that of an ACH transaction is close to 28 cents. Accepting a credit card or signature-debit card, meanwhile, costs the hypothetical chain almost 79 cents, according to numbers Croteau presented. “Today, checks and online [PIN] debit are neck-and-neck [in cost to Hannaford],” Croteau said. Hannaford, which issues a proprietary debit card processed over the ACH, has found it “difficult” to build volume on the card, Croteau, said, because the 140-store grocer can't compete with the rewards points and other incentives banks load on to credit and some debit cards. “We're not a payments business and we don't want to be a payments business,” he told the audience at NACHA's eCheck 2005 conference. “If we had incentives [on the ACH card], we'd be approaching the cost of a bank card.” Hannaford is a unit of Delhaize America, the U.S. division of Delhaize Group, based in Brussels.