Despite what you may have heard, PIN debit is still relevant and beneficial to your payment strategy (and your customers)

If you are like me – an elder Millennial – the debit card was your introduction to electronic payments. Who can forget your parents taking you into a bank branch with whatever money you had collected from birthdays, paper routes, or some other life event. You sat down with the banker, opened your first checking and savings accounts, signed the paperwork, and excitedly awaited your debit card in the mail, all too eager to learn about an overdraft. And, of course, the hallmark feature of the debit card – your PIN number.

Now, this is not a nostalgia piece on banking, but it is a discussion on why you (a merchant) need to remember that the debit card is an important part of your payment strategy.

Many will remember 2010 as the year the Durbin Amendment went into effect. This piece of legislation regulated the interchange rate for debit cards issued from banks with greater than $10 billion in assets to just five basis points plus 21 cents, plus 1 cent for a fraud adjustment. The legislation also required that debit card networks support at least two unaffiliated networks.

Go ahead, take your debit card out and look. You are likely to see a name like Accel, Jeanie, NYCE, STAR, or Shazam. These are the regional debit networks, and, unlike Interlink and Maestro, are unaffiliated with global brands Visa and Mastercard. These regional debit networks are important because they support the routing preference provision in the Durbin Amendment.

The effects of consumers choosing blindly between debit vs. credit vs. Visa/Mastercard Debit vs. US Debit

In a pre-EMV chip technology world, this meant that many cardholders would be posed with the question of “debit” or “credit” at the terminals of their favorite shops. By selecting “debit” and entering in a PIN number, the cardholder effectively sends a signal to route a transaction to the regional debit networks.

Behind the scenes, you and your acquirers had the ability to support routing hierarchies to send the transaction to preferential networks when available. This was you doing your best to mitigate the cost of accepting that transaction.

When the cardholder opts for “credit,” they send the signal to route the transaction as a signature debit transaction, which routes onto the rails of Visa and Mastercard.

In a post-EMV world, terminals began presenting more confusing options with selections like “Visa/Mastercard Debit” (more on this later) and “US Debit.” Depending on the acquirer or terminal provider, messages may vary and merchants may not have the ability to edit these messages. This confusion may lead to consumers inadvertently choosing to send the transaction down the wrong rails. An unfavorable decision made by the cardholder can cost you a difference of about 14 basis points. At scale, this can mean thousands of dollars in additional cost. Some take this very seriously. Now, I want to make a case as to why you should, too.

While some will argue that regulated debit rates mean there is no interchange benefit and that this routing is moot, many others would argue that regional networks still offer some interchange benefits and, of all things, have substantially reduced Network Assessments (scheme fees).

There has been quite a significant misinformation campaign against the regional debit networks. I would think Sen. Richard Durbin, D-Ill., agrees as he recently opined in the Wall Street Journal claiming unfair routing practices. While I have not seen any direct evidence of this, we can return to our post-EMV terminal experience.

Post-EMV, a cardholder using their Visa debit card would receive two options: “Visa Debit” or “US Debit.” Since the cardholder is using a Visa card, they easily recognize Visa Debit and may be confused by US Debit. Visa Debit initiates a signature debit transaction, while US Debit initiates a PIN transaction.

There are also claims that PIN is just antiquated and that the debit networks have not kept up with technology. This is a lofty claim because signature debit and credit cards really have not advanced so terribly far ahead.

What merchants ought to know about PIN and PINless debit

PINless debit is not often talked about and can provide convenience to consumers and cost savings to businesses. Many people purchase things from Amazon. If they use a debit card, Amazon asks whether they can treat your debit card as a debit card. This is Amazon using PINless debit. PINless can be used in a card present situation as well, effectively putting that routing power back into your hands.

The greatest offense is that PIN and PINless debit routing do not provide cost savings, but this is not true. I will gladly debate on the margin of savings, but to say they do not exist is not accurate.

If your business accepts card payments, you pay a variety of fees every time you process a transaction. There are four primary fee categories: interchange, Network Assessments, acquiring fees, and miscellaneous fees.

It is fair to say that the gaps in interchange fees between signature debit and PIN have narrowed, but it is also a fair statement to say that the gaps in Network Assessments continue to widen. Using PIN and PINless routing can also protect you against chargebacks, something rarely factored into the equation.


We have covered a fair amount of ground in this discussion, and hopefully, you now have a better understanding of why the debit networks should not be considered relics of the past.

In 2018, US consumers made 72.7 billion non-prepaid transactions. Making the regional debit networks a larger portion of those payments ultimately does two things you like:

  1. Reduces costs: Routing transactions over the debit networks can reduce the overall cost of payment acceptance.
  2. Creates competition: It creates further competition in the market that can lead to price competition and routing preference.

Creating more value in the payments value chain takes more than just turning on an option – it takes strategy.

We partner with our clients to evaluate strategies end-to-end and provide critical, quantifiable payments’ data to make informed decisions on payment options and cost mitigation. And we can provide the same for your business.

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