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« Learning, always learning | Main | What will replace cash? »

Debit dreams

By Dave Birch posted Oct 20 2008 at 10:11 PM

[Dave Birch] One of the key negatives in one of my diatribes against debit was that security is much more of a problem for debit than for credit. If debit goes bad, the money is gone from your bank account, not from your credit card provider's bank account. Here's an interesting suggestion for getting around this.

It would be really great if card issuers would give everyone two card numbers, one for only recurring, stable, relatively secure payments, and another, which is on the card that is used for day to day use at merchants, and maybe even a third, ‘high risk’ number for online/card not present purchases - but all linked back to the same ‘master’ account. This way, you wouldn’t need to get a new card if compromised online, wouldn’t need to change recurring payments if the card was lost, and wouldn’t need to manage multiple accounts - all activity ‘forwards’ to one account. Decoupled debit might be one way to get closer to this. There has been some activity around single use/virtual/disposable card numbers which usually expire after a short period of time. These are effective for avoiding fraud in online purchases, but I think they are too limiting, there are too many issues if you want to try to return something, and creates an extra step in the purchasing process most consumers don’t want to deal with.

[From Use Case for Decoupled Debit Cards]

This is an inventive twist: a decoupled debit product that uses existing debit products. I rather like the idea of my existing debit card provider (Barclays) offering me a disconnected debit product that connects to the same bank account. Why? Because I only use my physical debit card in ATMs -- I never use it at POS -- but I might sometimes want to use debit online and I don't want to give out my real debit card number in case it ends up in the hands of fraudsters. But, you might ask, why would I want to use my debit card online but not in shops? It's because I'm a rational consumer: there are some things that I pay for online that offer a not insignificant discount for debit (eg, car tax).

I've said a number of times that there's something in decoupled debit, whether behind bank cards, non-bank cards (eg, such as, to choose the transparently obvious example, the U.K. national identity card) or other tokens (see, for example, the German mobile payment scheme). In fact, any half-way secure token is even better than an actual debit card that carries a legacy magnetic stripe (in security terms).

These opinions are my own (I think) and presented solely in my capacity as an interested member of the general public [posted with ecto]


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