The Evolution of Debit: Poised for Aggressive Growth

Introduction 3

Background on Debit Infrastructure 3

Online and Offline Debit 5

• Figure 1: Online Debit Transaction Process 6
• Figure 2: Offline Debit Transaction Process 6
• Table 1: Online and Offline Debit Comparison 6
• VISA / MasterCard Current Debit Options 7

EFT Fee Structure Review 8

• Online Fees 8

U.S. Market Evolution 11

• Exhibit 1: ACH Total Volume 1995-2002 10
• Exhibit 2: Total EFT Volume, All Networks 11
• Exhibit 3: 2000 Federal Reserve System, Retail Non-Cash Payments, By Type 11
• Exhibit 4: 2003 Projected Non-Cash Payments by Type - Based on Federal Reserve Growth Rates 12
• Exhibit 5: VISA and MasterCard U.S. Debit Growth 1999-2002 13
• Exhibit 5b: Payments by Type in the UK (According to APACS Estimates) 13
• Exhibit 6: All Merchant Terminals Interlink & Maestro 14
• Exhibit 7: Pin-Based Merchant Terminals for Interlink & Maestro 14
• Exhibit 7b: Total POS Installations, All Device Manufacturers 15
• Exhibit 8: Checks Written Classified by Size 15
• Exhibit 9: POS Payments by Payment Method 16
• Exhibit 10: Average Transaction Size at the POS 16
• Exhibit 11: Average Transaction Value for Debit and Credit Card Transactions 17
• Exhibit 12: Switch Volume Leaders for All Transactions as of March 2002 17
• Exhibit 13: EFT Network Leaders By Monthly PIN-Based POS Volume (2002) 18
• Exhibit 14: Pin-Only vs. VISA/MasterCard Debit (at Top 10 Issuers by Total Debit Cards Issued) 18

Factors for Building an Estimated Debit Growth Rate 19

Mercator Projections 22

• Exhibit 15: MercatorProjection: Debit Card Growth for VISA and MasterCard 2003-2005 22
• Exhibit 16: MercatorProjection: Total Online/Offline/Credit Growth 22
• Exhibit 17: MercatorProjection: Type of Transaction at the POS 23

Conclustion 23