What’s the difference between the different kinds of debit transactions?
PIN Debit: Used in a retail environment, consumers select debit at the point of sale and enter their PIN (Personal Identification Number).
Signature Debit: Can take place at a retail location or an online Web site. Transactions are routed through the credit card networks (e.g., Visa® and MasterCard®) but are paid using a consumer’s funds on deposit in their checking or savings account.
No entry of a PIN is required for a signature debit transaction. As a result, there may be a heightened risk of fraud, and typically a higher interchange rate is charged to the merchant. According to The New York Times, PIN debit is generally the lowest-cost type of debit payment from a merchant perspective. The New York Times also states that the difference between signature debit and PIN debit fees are significant enough that some large retailers “…steer customers to use a PIN, the debit norm outside of the United States.”
Online Bill Payment (also known as PIN less Debit): A debit payment type used by certain Web-based merchants that have established some type of contractual relationship with the consumer and, therefore, know their identity.
Wireless providers are the largest merchant category using online bill payment. Consumers may pay cell phone bills online using a PIN debit card, but without being required to enter a PIN. Since consumer identity is already known, interchange rates are generally lower than card-not-present signature debit.