This is to do with the debit card system we have in the UK. In particularly, the largest debit card type, VISA Delta.
For those of you who are unfamiliar with this system, let us take a moment to run through the basics. Visa Delta is a system designed to enable people to use their bankcards like a credit card. The only real difference between a credit card and a Visa Delta debit card is that you have to have available funds in your account to make a purchase.
Sounds like a good idea? It is. And it's very successful, except there's a few cracks in the foundations.
Here is how the system works:
You go into a retail outlet and make a purchase. You hand your Visa Delta card to the sales assistant, she swipes it, keys in the value of the goods you wish to purchase, and then you sign the authorisation slip. That's it. Purchase made.
So what happens when the assistant swipes your card? At least 2 pieces of information are sent to your bank: your card number and the value of the goods. The bank then sets aside the required amount from your account. This process of setting aside an amount from your available balance is called "earmarking". The retail outlet then has 8 working days to follow up the earmark with a transaction, or the earmark is erased. This sets the earmarked funds as available funds again.
So where are the cracks? Let me show you. If the retailer keys in the wrong amount after swiping the card, they just swipe again and rekey. Then, the retailer is supposed to contact the bank and cancel the first earmark. If not, the sum of both earmarks is taken from your available balance.
"That's not so bad", you say, "It'll be cancelled in a week and a half." That may be so, but consider this scenario:
You have £200 of available balance in your account and go to make a purchase of, say, £120. The assistant swipes the card and accidentally keys in a value of £140. Realising their mistake, the assistant reswipes and rekeys the correct value. Immediately, your bank account has been earmarked for £260 -- more than your available funds. The assitant then forgets to cancel the first earmark and you are unaware of the mistake they have made.
The next day, you go to an ATM and your account has been frozen. You phone the bank and they tell you that the earmarked amount is greater than the available funds and that they can't do anything until a transaction comes through. Why can't they do anything? Because when the earmark information is sent to your bank, there is no way of identifying the retailer, thus disabling you from contacting them to get the earmark cancelled.
This is an appalling flaw in the system. It could be easily exploited to disrupt thousands of Visa Delta cardholder's lives by freezing their bank accounts for 8 working days.
So how many people know about the earmarking procedure? Surprisingly few people, which makes this evidently more disruptive as, potentially, a kind of socio-economic virus. The banks know about this and what are they doing about it? Nothing.
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For those of you who are unfamiliar with this system, let us take a moment to run through the basics. Visa Delta is a system designed to enable people to use their bankcards like a credit card. The only real difference between a credit card and a Visa Delta debit card is that you have to have available funds in your account to make a purchase.
Sounds like a good idea? It is. And it's very successful, except there's a few cracks in the foundations.
Here is how the system works:
You go into a retail outlet and make a purchase. You hand your Visa Delta card to the sales assistant, she swipes it, keys in the value of the goods you wish to purchase, and then you sign the authorisation slip. That's it. Purchase made.
So what happens when the assistant swipes your card? At least 2 pieces of information are sent to your bank: your card number and the value of the goods. The bank then sets aside the required amount from your account. This process of setting aside an amount from your available balance is called "earmarking". The retail outlet then has 8 working days to follow up the earmark with a transaction, or the earmark is erased. This sets the earmarked funds as available funds again.
So where are the cracks? Let me show you. If the retailer keys in the wrong amount after swiping the card, they just swipe again and rekey. Then, the retailer is supposed to contact the bank and cancel the first earmark. If not, the sum of both earmarks is taken from your available balance.
"That's not so bad", you say, "It'll be cancelled in a week and a half." That may be so, but consider this scenario:
You have £200 of available balance in your account and go to make a purchase of, say, £120. The assistant swipes the card and accidentally keys in a value of £140. Realising their mistake, the assistant reswipes and rekeys the correct value. Immediately, your bank account has been earmarked for £260 -- more than your available funds. The assitant then forgets to cancel the first earmark and you are unaware of the mistake they have made.
The next day, you go to an ATM and your account has been frozen. You phone the bank and they tell you that the earmarked amount is greater than the available funds and that they can't do anything until a transaction comes through. Why can't they do anything? Because when the earmark information is sent to your bank, there is no way of identifying the retailer, thus disabling you from contacting them to get the earmark cancelled.
This is an appalling flaw in the system. It could be easily exploited to disrupt thousands of Visa Delta cardholder's lives by freezing their bank accounts for 8 working days.
So how many people know about the earmarking procedure? Surprisingly few people, which makes this evidently more disruptive as, potentially, a kind of socio-economic virus. The banks know about this and what are they doing about it? Nothing.