{"id":17115,"date":"2021-10-15T08:30:00","date_gmt":"2021-10-15T12:30:00","guid":{"rendered":"https:\/\/einvestingforbeginners.com\/?p=17115"},"modified":"2023-09-27T16:31:22","modified_gmt":"2023-09-27T20:31:22","slug":"pin-debit-networks-a-guide-to-this-unknown-world-daah","status":"publish","type":"post","link":"https:\/\/einvestingforbeginners.com\/pin-debit-networks-a-guide-to-this-unknown-world-daah\/","title":{"rendered":"Pin Debit Networks: A Guide to This Unknown World"},"content":{"rendered":"\n
Updated 9\/25\/2023<\/em><\/p>\n\n\n\n In a survey recently<\/a> released by the Federal Reserve Bank of Atlanta, U.S. consumers use their debit cards to make payments 68% of the time. And in 2019<\/a>, consumers used debit cards for almost $3 trillion in payments. Needless to say, debit card usage is a big driver of payments in the U.S. and worldwide, and pin debit networks encompass a large part of that process.<\/p>\n\n\n\n With the rise of personal hacking information, particularly our personal financial information, security features like PINs help protect our data.<\/p>\n\n\n\n Most payment processors or merchants focus on credit cards, but the number of debit card transactions equals or exceeds credit cards. Mastercard has over 267 million debit cards in circulation, with over 46% of customers using it at least once a month.<\/p>\n\n\n\n Debit cards, linked to our bank accounts, make managing our money easier and help make payments easier, for example, linking your debit card to your Netflix account for your monthly payment. Because who can go without Netflix, right?<\/p>\n\n\n\n In today’s post, we will learn:<\/p>\n\n\n\n Okay, let’s dive in and learn more about pin debit networks.<\/p>\n\n\n\n <\/p>\n\n\n\n We can use the debit card in our wallet as a signature or PIN-based transaction, and the merchant will be charged different rates depending on our choice.<\/p>\n\n\n\n <\/p>\n\n\n\n So, what is a PIN-based transaction?<\/p>\n\n\n\n A PIN debit transaction occurs when we, the customer, enter our personal identification number or PIN to make the transaction<\/strong>. Processing the debit card as a PIN causes the transaction to route through the debit network instead of the credit card network; more on this is in a few moments.<\/p>\n\n\n\n\n\n\n\n The PIN is a numerical code we enter when activating our new debit or credit cards. The sole purpose of the PIN is to provide an additional layer of security to our transactions. Debit cards are most commonly associated with PINs linking directly to our bank accounts.<\/p>\n\n\n\n We use PIN verification in many locations when withdrawing funds at an ATM, paying for gas, buying groceries above $50, and many others.<\/p>\n\n\n\n And each time we do that, the transaction routes through a different card network, which charges a different fee to the merchant, which is how card providers make money.<\/p>\n\n\n\n The debit card first appeared in the early 1970s, and debit card PINs first appeared in 2013 with the passing of the Durbin Amendment.<\/p>\n\n\n\n The Durbin Amendment had a tremendous impact on the payments industry. Before 2013, Visa dominated the card processing world, particularly debit cards. The Durbin Amendment caused card brands to create two sets of fees: one for regulated card-issuing banks, like Wells Fargo. And another for unregulated card-issuing banks, like PayPal.<\/p>\n\n\n\n These changes put a cap on the fees a bank like Wells Fargo can charge merchants for using a debit card; any bank with more than $10 billion in assets capped the fee at 0.05% + $0.21 per transaction. The percentage listed above is “5 basis points” of the value of the transaction; for example, if you pay $2 for a Coke, the merchant gets charged $0.10 + $0.21, or $0.31 per bottle sold. That charge reduces a merchant’s profit on the product and should be factored into the pricing to help reduce the impact.<\/p>\n\n\n\n However, because they are not regulated banks, companies such as PayPal can charge more, which allows them to make more money off these transactions and charge different rates for different transactions.<\/p>\n\n\n\n And when a customer chooses to use their debit card and bypass entering their PIN, the merchant gets charged a different rate.<\/p>\n\n\n\n <\/p>\n\n\n\n With the passing of the Durbin Amendment, as part of the Dodd-Frank Bill in 2013, merchants could get some relief on processing fees from debit card transactions. The amendment also offered two separate networks to process the payments to ensure every debit card has multiple choices.<\/p>\n\n\n\n <\/p>\n\n\n\n As I mentioned earlier, before the Durbin Amendment, Visa dominated the debit card network, but with the passing of the amendment, merchants could now route their debit card payments through local networks and, using transaction volume and value from preferential deals, were able to lower their costs.<\/p>\n\n\n\n Two types of transactions:<\/p>\n\n\n\n But, because there has been some pushback on using PINless authorizations, many processors force these payments to go through the Visa or Mastercard networks as Card Not Present, which is much more expensive.<\/p>\n\n\n\n Many in the industry believe that these violate the Durbin Amendment. Some believe the strong relationships between issuers and the large networks are putting up roadblocks to adopting PINless transactions because it drives up fees for both.<\/p>\n\n\n\n The other method of processing debit card transactions is the signature method, which requires the customer’s signature. That type of transaction automatically routes over the Visa and Mastercard payment rails. They are also referred to as offline debit transactions.<\/p>\n\n\n\n <\/p>\n\n\n\n\n
What is A Pin Debit Network?<\/h2>\n\n\n\n
An Introduction to Online Routing and PINless Transactions<\/h2>\n\n\n\n
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Common Debit Card Networks and Their Fees<\/h2>\n\n\n\n