MKR with YAB Dato' Sri Najib

Friday, April 15, 2016



1.    An offline transaction, also known as a signature debit transaction, is a payment method that uses a debit card to transfer funds from a checking account to a merchant across a digital credit card network.

1.    When you pay for goods or services with your debit card, you have the option to process your payment in one of two ways:

i)                   As an offline transaction via a credit card processing network, or

ii)                As an online transaction via an electronic funds transfer (EFT) system.

2.    Offline transactions are processed much like credit card transactions.
3.    They are sent over one of the major credit card networks -- Visa, MasterCard, Discover, etc -- depending on which credit card network your bank is associated with as a member bank.

4.    The cost of the transaction, called an "interchange fee," is typically 2-3% of the total purchase. The interchange fee is charged to the vendor/merchant, not the bank.


1.     USD 20.5 billion in interchange fees were charged to merchants in 2010. 

2.    Now they are at the centre of debate among lawmakers, banks and merchant unions in the U.S. On one side of the argument are the banks, which claim the interchange fees are necessary to cover the costs of processing transactions and providing fraud protection.

3.    On the other side are the merchants and vendors, who claim the rising interchange fees are increasingly cutting into their profits, forcing them to raise the prices of their goods and services!

4.    In July 2010, the Dodd-Frank Wall Street Reform and Consumer Protection Act were passed by Congress, and included in the Act was an amendment to address interchange fee reform (the Durbin Amendment).

5.    Under this amendment the Federal Reserve is now authorized to review and reform debit card transaction fees. 

6.    One such proposal will cap interchange fees at $0.12 per transaction, a 73% reduction from the average charge of $0.44 per transaction.

7.    As a consequence, consumers can expect a loss of financial perks like free checking accounts, the end of rewards programs for debit cards and an increase in fees for ATM withdrawals from out-of-network banks.

8.    If interchange fee reform is not passed, the cost of the fees will be borne by the consumer, as merchants continue to increase the prices on their goods and services to make up for profits lost to fees.


1.    Unlike online debit transactions, offline debit payments do not involve PINs.

2.    Offline debit cards (or check cards) are typically issued by credit card companies through their participating banks.

3.    The cards may be used everywhere credit cards are accepted, including over the Internet.

4.    In the physical world, customers who choose to make offline debit purchases must hand over their check cards.

5.    Merchants swipe the cards through their payment terminals and complete the debit sales the same way they process credit card transactions.

6.    The customers then sign sales drafts that authorize the merchants to charge their accounts.

7.    On the Web, customers enter check card information into browser-based forms, just as they would for credit card purchases.

8.    The data is encrypted, captured by transaction processors and sent to the credit card processing networks for authorization. Transactions normally settle in two to three business days.

9.    Because check card transactions are processed through the same networks as credit cards, they often incur the same discount rates and transaction fees.

10.   If your business is already equipped to process credit card transactions (for instance, you have a merchant account, a credit card processing service and either a terminal and printer or payment-processing software), you should also be able to process offline debit payments.

E)    DEFINITION of 'Offline Debit Card'

1.    A card that combines characteristics of both a traditional (online) debit card and a credit card, allowing the cardholder to pay for goods and services directly from his or her bank account.

2.    As with a traditional debit card, a transaction using the offline debit card creates a debit against the cardholder's bank account.

3.    But unlike with a traditional debit card, a Card PIN Number is NOT required during the transaction - all that is required is the user's signature. These cards are generally issued by credit card companies in association with the bank in which the account is held.

#Shared By MKR#

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