Kathryn Petralia

Co-Founder and COO at Kabbage

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Bio Co-founder and COO of Kabbage, a financial services startup. Kabbage makes loans to small businesses who sell merchandise online via marketplaces such as eBay, Amazon, Overstock, etc. Kabbages utilizes unique, real-time data to effectively assess and manage risk. Kabbage has completed its seed fi Career History 12 years in financial services, 9 in payments with specific expertise in consumer and business lending, alternative payments, ecommerce, mobile payments/banking & subprime markets.

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Is the PEN mightier than the PIN?

You are absolutely right; issuers earn more for signature credit & debit transactions than PIN transactions. I don't think consumers understand the differences in liability between the two; they simply want to make a purchase as quickly as possible. Merchants, on the other hand, particularly smaller merchants, don't understand the advantages of accepting PIN debit transactions. Processors have been known to discourage the acceptance of PIN debit transactions, offering more attractive pricing for signature debit & credit transactions in the hopes that the merchant won't realize what they are missing. Merchants have even been told that PIN transactions will slow the checkout process. There's a reason, however, that Wal-Mart & other large merchants have modified their POS devices to prompt for a PIN on debit transactions; they know it's less expensive and that knowledge will eventually spread. The current financial meltdown, however, combined with impending regulation for credit card issuers in the US, may expedite that process. Consumers are spending less with credit and more with debit as their fears about economic instability increase; they are even starting to save money again. It's a good thing, too, because issuers will be tightening credit standards if the credit card reform act passes. Fewer consumers will have access to easy credit, and will be forced to rely more heavily on debit cards for purchases.

16 Dec 2008 Reply Read article