Your business authorizes and settles debit card payments using either the card brand network on the front of the card or the debit networks printed on the back. There are three key differences between these two processing paths: cardholder validation, chargeback mitigation, and costs.
Processing a debit card through card brands means using the “credit rail,” while using the debit networks is called the “debit rail.” The debit rail requires the entry of a unique, secure personal identification number (PIN) known only to the cardholder. The PIN validates that the cardholder is most likely the authorized user of that debit card, which can stop fraudulent use before the transaction is authorized. In recent years, EMV technology has helped significantly reduce cases of card fraud, however, EMV can only stop counterfeit cards, not fraudulent card users - PIN changes that. This additional layer of validation helps your business protect itself against fraudulent use and fraud related chargebacks.
There are many types of fraud, but one of the fastest growing is called friendly fraud. This occurs when a cardholder uses the chargeback process to reclaim funds by presenting a dispute based on fraud when no fraud was committed. PIN helps your business demonstrate the transaction was validated with the PIN provided by the debit card issuer and most likely authorized by the cardholder. Since the issuing bank can see whether the charge in question was secured with a PIN or not, the bank is more likely to ask for additional proof from the cardholder before presenting a chargeback on a PIN secured debit transaction. The use of PIN verification protects your businesses before you even see the chargeback hit your accounts.
The debit and credit rails carry different charges based on the prices associated with each network that provides card approval for the transaction. However, if your business does not prompt for PIN when customers use debit cards, you could pay more than necessary for your debit card transactions. Debit optimization enables PIN acceptance on PIN capable devices, and prompts for PIN immediately when a debit card is presented. While you can fall back on signature verification if you need to, prompting for PIN first enables your business to take control of debit card acceptance costs.
Today, most major markets require PIN on every debit card transaction. While EMV authorization indicates the debit card is valid, PIN entry validates that the cardholder is the authorized owner of the card. Not allowing a cardholder to avoid PIN by choosing to use a signature instead, eliminates the benefits of PIN authentication.
Why make the shift to PIN on debit:
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