PIN-based debit authorization rates have recently increased dramatically, some merchants complaining that their auth rates have increased up to four times their previous rate.  In some armchair research, I learned that Interlink (Visa) and Pulse (Discover) have removed interchange caps on transactions.  For most merchants, it is still cheaper to process a PIN-Based Debit transaction than a credit card transaction (on a per transaction basis), but for others it is about the same.  Or at least the difference in cost is so minimal that their volumes don’t force an advantage one way or the other.

Numbers, by DeclanTM

Numbers, by DeclanTM

Visa is enforcing PIN Entry Device (PED) mandates, effective on July 1, 2010, whereby all PEDs must comply with the PCI PED Standard.  For retailers purchasing new equipment in the last five years, this should not be an issue.  But for one industry in particular, the desire for electronic signature capture or other payment initiatives has not driven the purchase of replacement payment equipment.


Think about your last trip to the gas station to fill up on petrol.  Did you use a credit card or a PIN-based debit card?  Actually, the card you used PROBABLY can do both, so which functionality or network did you use?  Did you stick with Visa?  Or did you use the debit side, Interlink?

If you used the debit side, the payment processing equipment in the pump may have used extremely weak or just single DES-based encryption.  This equipment simply does not (in most cases) have the ability to do Triple-DES encryption for PIN-based debit authorization.  So as a fuel provider that is looking at a five to ten year payback on any equipment purchased, do you make the jump to comply with these standards now?  Or do you just turn off the PIN-based debit support?

Technically, providers can still use Signature-based debit authorizations (if you went inside to pay), so they would not be saying no to debit all together.  Will new methods of payment be introduced that might render an investment in equipment today useless?  Possibly, but I think what is worse is that the equipment providers woefully underestimated the demand for the product, and prices are likely to increase as merchants race to deploy compliant equipment.

If you are a fuel provider, would you consider disabling PIN-based debit at the pumps?  Since nearly all cards that use PIN-based debit can also be used as a straight credit card authorization, wouldn’t the extra per-transaction cost be worth it when facing a multi-million dollar (or at least into the tens of thousands for smaller franchisees with just a few locations) upgrade cost?  What if you could slowly upgrade over the next five to ten years, and the upgraded equipment could also allow you to buy other things like sodas, fuel additives, or other convenience items right at the pump?  Would your return far exceed that if you had to do the upgrades twice?

Consumers, would you not shop at a gas station that did not offer PIN-based debit as a payment option?  Since you don’t sign a receipt or signature pad at the pump, punching a PIN into the device seems like a lot of work!

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