The benefits provided by Pre-Authorized Debit are three-fold, as opportunities and benefits exists for the banks, the retailers as well as the cardholder.
Opportunities exist in several markets, firstly towards the more established sector in the West, with whom Pre-Authorized Debit will provide added value to existing card payments and then the under-banked and un-banked whom either do not have the means to facilitate a payment card due to lack of communication infrastructure and those who previously have been a credit risk. This therefore generates new merchants for all card issuing and acquiring institutions, as well as providing return on the EMV investment.
Pre-Authorized Debit provides retailers with the benefit from their investment on the EMV migration programme, and as the Pre- Authorized Debit concept is based upon the Chip & PIN facility it makes this a secure method of payment with funds guaranteed. With it also being an off-line payment, the transaction is quicker than cash - so no delays with foot-fall at POS.
Cardholders are benefited in different ways, depending upon their origin. The current card users (deemed to be in the West) will benefit from no longer needing to carry small change for low value products and services such as parking, newspaper, confectionery etc, so fumbling around for cash will become a thing of the past. Pre-Authorized Debit therefore provides a convenient and secure payment method as PIN authorisation is still needed by the cardholder. New customers will be from those who ordinarily have been refused a payment card and therefore removes the stigma attached to this consumer type, who previously due to credit rating was unable to utilise a card for payment. Other new customers will be from those who through lack of infrastructure within their geographic region, have only been able to use cash and have therefore not benefited from a secure payment system. Providing a payment method to these customers opens a complete new channel of transactions both for the retailers and banks.