Friday, February 20, 2009

PINless Debit is not synonymous with Signature Debit

Signature Debit is used without a PIN but it is not PINless Debit. This is just one of the many perplexing realities of the payment world. You really have to leave your common sense at the door. It is true that you would not be using a physical signature to "sign" a PINless Debit transaction but you would be using your electronic "signature".

PINless Debit is a type of transaction where a consumer can pay a very limited type of bills such as a Utility bill, mortgage payments, etc. with the same card they otherwise would use at the ATM with a PIN or at the POS with a signature or a PIN or online as a signature debit. PINless Debit transactions are processed by the ATM networks such as Star, NYCE, Exchange, etc. The card may have a Visa or MasterCard logo on it but for these unique transaction types and with certain merchants who have been individually qualified by each ATM network, they would be processed as PINless debit. Interlink/PLUS and Maestro/Cirrus which are the Visa/MC PIN based POS/ATM networks do not support PINless Debit. These transactions are priced with a % fee but it usually caps out at around $.50.

Signature debit (used to be referred to as check cards) is where a debit card that also has a Visa or MC logo on it can be used for any retail or online purchase and when it shows up at the bank the funds are debited from the consumer’s checking (DDA) account. These transactions are priced like all Visa/MC transactions under Interchange albeit slightly less than credit card interchange but there isn’t a cap on the fee.

As an example, I have a Wells Fargo card that doubles as my ATM card and as my signature debit card. Depending on where I use it and which button I press on the POS terminal the transaction travels over a different processing network and the merchant would pay a different fee. If I were to use it at my mortgage company online, (and they had set up all the right back end systems and agreements), the transaction would run across the STAR ATM network rails. If I use it at a BofA ATM and enter my PIN, it likely would travel across the PLUS or STAR networks. If I use it at the POS and enter my PIN, it would travel across the Interlink network (owned and operated by Visa) and if I use it online to shop at AMAZON, it would travel across the Visa network.

Have I completely confused you? I have gone back and read this post over a few times and even I am confused. Oh well!

10 comments:

Offthegrid said...

Isn't Metavante trying to get a pinless network off the ground to compete against Visa/MC?

SKlebe said...

There are a variety of initiatives out in the market that are attempting to leverage either the ACH or the online banking interface as alternatives to using Visa and MasterCard's Credit and Debit products. One uses a floating software based PIN Pad, another uses an actual hardware device that needs to be distributed to cardholders and yet another uses an approach that generates a one time card number as a proxy. However, none of these are the exact equivalent of "Pinless Debit".

Offthegrid said...

Where does Revolution money play into that?

SKlebe said...

At this point Revolution money isn't relevent since they have not achieved enough scale. Their big bang is that the use of their card requires a PIN, but it is a credit like instrument, not a debit instrument.

Offthegrid said...

I've seen the limited list of available places to use the card.


There is both a credit card and a prepaid debit card. The debit card is part of Revolution Money Exchange sort of a companion card. I believe it can be loaded via ach (too slow).

e signature said...

Thanks for discussing the difference between Pinless debit and Signature debit. First of all, i was confused between both them then I read it again very carefully and found is quite useful.Pinless debit is looking to be useful utility. I never used it bfore..how can i go for it ?

SKlebe said...

You are welcome! Is your question from a consumer or merchant perspective? From consumer, everyone has their Debit/ATM card, but for an online merchant accepting Pinless Debit is still very category specific, like utility bills, etc...

PINless wha? said...

What is involved in the "back end" setup should a consumer want to setup a recurring PINless debit instance for their mortgage payment? Are there minimum requirements to authenticate yourself? Do you EVER have to provide your PIN regardless it being a mortgage, utility, or other approved PINless debit payment?

SKlebe said...

hi, to be frank with you I have not followed the developments of this particular form of payment. The consumer cannot drive this. The utility or mortgage company has to set this up with their processor. I am not sure it works for recurring payments. The other alt which is much more common and normally less expensive for the business, would just be to use the ACH.

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