Online vs. Offline Debit Transactions

Q: The terms "PIN-based" and "signature-based" often appear in discussions about debit card acceptance. What do these expressions mean? And just how do the payment options differ?

A: The terms make reference to the two distinct ways that debit payments are processed: online and offline. Online debit transactions demand customers to endorse payments by submitting their personal identification numbers (PINs) at the idea of sale, while offline transactions require shoppers to sign sales receipts.

The next information will help you understand more about PIN-based and signature-based debit transactions, and how each payment option can benefit your business.

Online Debit PIN-based debit transactions are fast, convenient and secure. In brick-and-mortar environments, shoppers initiate online debit payments by swiping their debit cards through magnetic card readers. The clients then key their secret codes into encryption devices called PIN pads. The transactions are authorized instantly, funds in the customers’ accounts are captured immediately, and money is transferred into storeowners’ accounts in 2-3 business days. Merchants pay a nominal transaction fee. And as the customers authorize their purchases with PINs, the chance to merchants of chargebacks is virtually nonexistent.

To simply accept online debit payments, you’ll want a merchant account, a debit processing service, a payment terminal, a receipt printer and a PIN pad. Many payment processing companies offer both credit and debit card services, nevertheless, you should be approved for them separately. You can buy a terminal and printer with a PIN pad or buy a discrete, free-standing PIN-entry device and connect it to your payment system. Remember that your customers should be able access these devices and enter their codes in private.

Practically speaking, this sort of debit transaction happens to be obtainable in the physical world only, not the web. A number of finance institutions have introduced technology that may advance the development of PIN-based debit processing online, such as for example digital certificates, smartcard solutions and compact disc-based systems. But no widely-accepted operating standards have yet to be established.

Offline Debit Unlike online debit transactions, offline debit payments usually do not involve PINs. Offline debit cards (or check cards) are usually issued by credit card issuers through their participating banks. The cards can be utilized everywhere bank cards are accepted, including online.

In the physical world, customers who choose to create offline debit purchases must give their check cards. Merchants swipe the cards through their payment terminals and complete the debit sales the same manner they process credit card transactions. The clients then sign sales drafts that authorize the merchants to charge their accounts.

Online, customers enter check card information into browser-based forms, just because they would for credit card purchases. The info is encrypted, captured by transaction processors and delivered to the credit card processing networks for authorization. Transactions normally settle in 2-3 business days.

Because check card transactions are processed through the same networks as bank cards, they often times incur the same special discounts and transaction fees. If your business has already been equipped to process credit card transactions (for example, you have a merchant account, a debit card processing service and the terminal and printer or payment-processing software), it’s also advisable to manage to process offline debit payments.

Making the decision Both types of debit acceptance let merchants offer payment flexibility with their customers, which can capture impulse buying, generate higher-ticket purchases and improve customer loyalty. But PIN-based debit transactions offer added benefits, such as for example:

  • The choice to provide cash return to customers, which increases store traffic.
  • An easy way to go shoppers through the checkout line.
  • Virtual elimination of chargebacks and fraud.
  • Higher transaction approval rates.
  • Prospect of additional revenues from surcharges.

The huge benefits are clear. With reduced investment, brick-and-mortar merchants may use PIN-based debit transactions to greatly help increase their profits.

But what does the distinction between signature-based and PIN-based debit mean to your business? If you are an Internet merchant, check card acceptance can provide you usage of buyers who might not qualify for bank cards, such as for example teenagers. Plus, you obtain funds from approved transactions quickly and securely. Perhaps most significant, you can accept signature-based debit payments with relative ease because they’re processed much like credit card sales.

In the event that you own a business in the physical world, you love the flexibleness to process signature-based debit payments along with PIN-based transactions, which provide increased security and opportunities to create additional revenues.

Contact a payment company with experience in debit processing to understand about the payment options that best suit your business–and learn how debit card acceptance might help improve your company’s important thing.

Cardservice International Senior Vice President of Sales John Burtzloff manages sales strategy and execution and therefore is in charge of managing all areas of the business’s marketing, communications, telesales, check guarantee, new accounts and sales support activities.

The opinions expressed in this column are those of the writer, not of Entrepreneur.com. All email address details are designed to be general in nature, without regard to specific geographical areas or circumstances, and really should only be relied upon after consulting a proper expert, such as a lawyer or accountant.

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