Bank of Bermuda customers are expected to debit merchandise worth over $32 million this year through the financial institution's new "electronic chequing,'' the bank said yesterday.

Since the bank's EasyLink card -- the Island's first debit card -- was launched on December 12, 1995, it has been used in about 437,000 transactions, Bank of Bermuda manager, electronic banking David Lema, said yesterday.

Customer response has been "incredible,'' he said.

Mr. Lema estimated the debit card has been used in Bermuda to buy about 90 percent, or $28.8 million, of the $32 million total.

At point of sale, EasyLink debit cards instantly and automatically deduct money from Bank of Bermuda chequing accounts -- provided the cash is there.

Bermudians prefer to use credit over debit when they travel, Mr. Lema said.

As part of the EasyLink debit card, which carries a $20 annual fee, the bank will during the week of December 16 give a one percent cash back rebate. The bonus relates to goods and services bought in Bermuda by customers with Bank of Bermuda chequing accounts as their primary account.

To recoup the $20 annual fee, debit card holders needed to buy $2,000 worth of goods and services over the year.

The bank's cash back payout could reach $275,000.

In a RG Magazine ad, the bank conservatively projected the pay back will be $221,986.

Bank of Bermuda senior vice president, retail banking Alan Richardson yesterday called the card an "overwhelming success.'' A year ago, the bank sent out 14,000 debit cards. That number has since grown to about 17,500, he said.

The debit card is accepted at 1,200 Island locations and millions of businesses abroad.

Mr. Richardson said the bank chose not to give the one percent rebate to savings account only customers because these accounts are already interest bearing. But this group, a minority, still pays the $20 annual debit card fee.

As well as the annual fee, the debit card generates merchant discount and interchange fee income. Merchants pay a 1.5 percent fee to the bank for goods bought with the debit card.

Interchange fees are generated when an EasyLink card is used at a Bermuda merchant who banks with the Bank of Butterfield or when the card is used abroad.

There is no interchange fee when the Bank of Bermuda debit card is used at an Island merchant who banks with the Bank of Bermuda because "we are the issuer of the card,'' Mr. Richardson said.

On the benefit to the bank's bottom line, Mr. Richardson said the fee revenue helps "support the programme on a worldwide basis'' and that the network is "extensive and sophisticated.'' The debit card also carries ATM functions. Additional features are anticipated.

"When we introduced the debit card, we positioned it as a future electronic access to the bank,'' Mr. Richardson said.

The big push behind the debit card was to shift customers away from cheque writing and toward electronic banking. Ultimately decreasing back office work and speeding bank lines.

Mr. Richardson said with the debit card in place, the bank has easily seen a ten percent reduction in cheque processing volumes.

Though the debit card -- because you need a chequing account to get the one percent rebate -- has generated more individuals opening chequing accounts, the total number of cheques being processed by the Bank of Bermuda has declined significantly, Mr. Lema said.

As of the end of August, the Bank of Bermuda had processed 227,000 fewer cheques than in the same period last year, he said.

And we are now going into the busy Christmas shopping season, he said.

The bank has made a "fair'' return for the money invested in this debit card technology, Mr. Lima said.

"Is it profitable, yes, is it making a ton of money, no -- but it wasn't designed to.'' ALAN RICHARDSON -- Bank's EasyLink an "overwhelming success''.