Debit cards, debit signature or pin

4 Minutes read
Debit signature or pin- why is it difficult to get to a pin debit transaction on a credit card or POS?  What are the two ways to run a transaction on your debit card?  Does debit signature or pin debit charge less fees to the business?  Is there an on-going investigation into how Visa is routing debit transactions?

What is a debit card?

A debit card is a card issued by a financial institution and tied to the cardholders DDA.  Let’s define the difference in the transactions on debit cards. Debit cards issued by a bank are tied to a checking account and its corresponding balance. Debit cards are a more “guaranteed” transaction than a credit card. The approval on a debit card is based upon the checking account balance. If there’s money in the checking which is greater than or equal to purchase and authorization amount; an approval is granted. The purchase is completed and the transaction will be settled and deposited to the merchant’s bank account.
Two ways to use your debit card at a retail business:
  1. Use a pin number you’ve chosen to accept the transaction.  Called online debit or pin debit.
  2. Use a signature to accept the transaction.  Called signature debit or offline debit.

Signature Debit

Signature debit is approved and settled through a card brand network. Most common card brands are visa and MasterCard. Chip and pin debit cards running through the card brand networks are rare in the US. Signature is still used to validate the transaction. However, signatures are unnecessary with EMV transactions according to most card brands.
Pin debit requires a pin to “ok” the amount by the customer. When a pin debit transaction is run it goes through the pin debit networks. Pin debit can only be run in a face-to-face environment.
Historically speaking, pin debit has always been a way for businesses accepting credit and debit cards to save money. There are many ways for processors to bill merchants for pin debit. This article is to discuss pin debit and recent difficulties for merchants to run pin debit transactions. Average ticket always play a role on when to use pin debit to save money. We recommend speaking with your processing company to see where it’s beneficial for you. If you’d like another opinion, give us a call and we can help.
Pre-emv, pin debit was simple for merchants and their customers.  Most pin debit transactions were run through a pin pad.  A pin pad is an external device connected to the credit card machine or POS to accept customer pin numbers.  The process to run a pin transaction looked something like this:
  1. select debit on the credit card terminal
  2. put in the sale amount
  3. Swipe the card
  4. Have customer I put their PIN number into the pin pad
  5. Done, authorization, receipt finished.

It was easy to train the merchant and their staff.

Where are the pin pads to run pin debit?

For some reason or reasons after EMV came on the processing scene in 2015; pin debit has become more difficult to run.  Pin Pads connected to a credit card terminal have all but disappeared.  Most of the disappearance of pin pads is due to the excessively long transaction times with the pin pads and credit card terminals and the numerous communication errors between the two devices.  Consumers see pin pad devices at major retailers or grocery stores.  However, they are not seeing pin pads at most locally owned businesses.

VX520_face-shot_lg-150x150

EMV Credit Card Terminal

Ingenico

Would you assume you could enter your pin if you don’t see a pin pad for a debit card transaction?  Locally owned businesses must be proactive with their customers and tell them they accept pin debit.  Most of the time, there will only be a credit card terminal and no pin pad, due to the issues referenced in the prior paragraph.
In many cases there are numerous extra steps to run a pin debit transaction. On a traditional emv credit card terminal, such as a Verifone vx 520 or Ingenico ict series, I select debit. Now one would think follow the steps pre-emv, right? No, one must continue their vigilance. There’s another prompt, visa debit or us debit on Visa debit transactions. Visa debit is listed first.  In order to run pin debit one must select us debit.

Wonder why confusion and extra steps for pin debit?

Is Now the feds are looking into this routing practice: https://www.digitaltransactions.net/ftc-probes-debit-routing-and-other-digital-transactions-news-briefs-from-11-14-19/.  The article doesn’t really say anything about the reason behind the routing. My best guess is money. Visa loves money. They are going to collect their assessments when it goes through their visa network. Most common assessment is .13% of the settled transactions. For a list of all the D.F.A. s or dues, fees, & assessments, https://www.cardfellow.com/blog/credit-card-processing-fees/
The money: if a merchant settles $10,000.00 of transactions on visa debit cards, Visa collects $13.00. According to credit cards.com in 2015 there were $33.8 billion transacted on debit cards through the card brand networks. If visa controlled 80% of the volume, that means $27.04 billion was settled in visa debit transactions. Why would visa want those transactions to settle as visa verses pin debit- you guessed it, money! How about $27.04 billion * .13%= $35,152,000.00! There are more Assessments collected by visa when debit cards are settled in their network. However, .13% of the settled volume is the largest assessment. Suffice it to say; money may in fact be the answer?
Just confirmed, today, click here for the full article: “In a brief notice in its fiscal 2019 report to the Securities and Exchange Commission, Visa said the FTC’s Bureau of Competition on Nov. 4 “requested that Visa provide, on a voluntary basis, documents and information for an investigation as to whether Visa’s actions inhibited merchant choice in the selection of debit payments networks in potential violation of the Durbin Amendment to the Dodd-Frank Wall Street Reform and Consumer Protection Act. Visa is cooperating with the Bureau.””  Visa admits the FTC is looking in to their debit card transaction routing.

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