Are Cost Savings Great Enough To Bother With PINless Debit?

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in Blog
on Sunday, 09 November 2014 22:03

Maybe your business should be looking into the advantages of PINless debit even though the cost saving and other advantages aren’t as big and impressive as they once promised to be. Adding this capability still makes sense for many companies, and it could be a smart course of action for you.

PINless transactions are processed in real time with funds taken from the cardholder account immediately and available to merchants the next day. In many ways, these transactions work similarly to electronic check debit, but a bank routing number isn’t necessary, simplifying the process.

When PINless debit networks were first introduced, the costs savings were big, and that made this alternative to ACH and regular debit card transactions very attractive for some businesses. But in 2011, the Durbin Amendment -- intended to reduce the burden of processor fees on merchants -- was passed, setting a maximum interchange fee for all types of debit card processing.

On behalf of their member banks, Mastercard and Visa were charging 2 to 3.5 percent of the transaction amount as a processing fee, but the amendment set the maximum interchange fee at 0.95 percent. This significantly limited the appeal of PINless debit networks, which were often charging just 10 to 20 percent less than that.

In Some Industries, A Little Means A Lot

For businesses with tight margins, those that handle many small transactions and those trying to make a profit in a very competitive industry, a small savings on some transactions could make a significant difference in the bottom line. While some merchants lost interest in PINless debit, big businesses with high volumes can still get enough benefit to make adding PINless debit capabilities a sensible idea.

If your company is a large business with a high transaction volume and you aren’t using PINless debit, you’re probably paying significantly more in fees than you should. For mid-sized companies with relatively low transaction volume, the costs savings might not add up to much. PINless debit is unlikely to be available to or beneficial for small companies.

There are also reasons other than cost that might cause a business to benefit from PINless debit.

When Chargebacks Are A Problem

When transactions are processed through PINless debit, they can’t be disputed and chargebacks are not allowed. If your company has a problem with a large number of chargebacks that are putting you in danger of ending up in the Terminated Merchant File, adding PINless debit capabilities could be one way to help you reduce the number of chargebacks and stay in business.

While you may not end up with significant additional revenue from PINless debit transactions, processing some cards in this way means fewer of your transactions are at risk for chargebacks. You must keep in mind, however, that PINless debit is only available to larger merchants in so-called “safe” industries and may not be available as the savior you need.

Get The Complete Picture

Immediate confirmation of PINless debit transactions has its advantages over ACH and electronic check transactions in which funds can’t be confirmed. While the wait for the money to come the next day is about the same as with ACH, there’s simplicity in not having to enter a routing number and checking account number and instead entering just the debit card number.

You’ll have to decide if the cost savings alone are reason enough to add PINless debit capabilities to your payment processing arsenal. But there are other advantages as well. Talking to an expert can help you decide if those add up for you.

To learn more about PINless debit and how it could benefit your business, contact PayVisors. Our team answers difficult questions all the time, and we can help you too.

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