NOTE: This article applies to US Helcim merchants only
Credit or Debit?
Do you know what happens when you select either "credit" or "debit" when using a US debit card? Most customers don't, and a lot of merchants don't either, but there is an important difference. When a customer in the US pays for a purchase with their debit card, the choice they're really making when they select "debit" or "credit" is whether the transaction is being processed through the debit network or through the credit network.
Automatic Routing Change
If you're a US Helcim merchant, you might have noticed that for recent debit transactions, your customers may not have been prompted to select whether to process their debit card through the debit network or through the credit network. That's because starting at the end of March 2019, Helcim's partner bank Elavon had issued a software update so that when card readers detect a debit card, they will auto-select the debit network. Processing US debit card transactions on the debit network will save your business money because the debit interchange rate is lower than the credit network interchange rates.
This change is not only advantageous due to the lower debit interchange rates, but effectively forcing the transaction to be processed on the debit network also helps protect your business from fraudulent transactions because customers will be required to validate their identity with their PIN, which is far more secure.
An exception to this update is businesses in the hospitality or restaurant industry who will not see any change to their debit transaction processing routing.
Here is a breakdown of what happens for each selection, and which parties are involved in each type of transaction.
If a customer selects "credit" for their purchase, the transaction will be processed using the Visa or Mastercard network and customers are able to authorize the transaction using their signature without being prompted to enter their PIN. However, what this means for you as the merchant is that using the credit networks will likely mean you will pay a higher interchange rate for the transaction, and your exposure to fraud will be higher than it is with a PIN-verified transaction. This means that any transaction processed on the credit network will cost your business slightly more in fees with more risk than if they were to be processed on the debit network.
If a customer selects the "debit" network for their purchase, then the transaction will be processed using the debit network, not the credit network. Some popular debit networks in the US include STAR, Pulse, Interlink, and Maestro. The debit network used will depend on which bank issued the customer's debit card.
When transactions are processed on the debit network, the purchase is processed as a true debit transaction and you will be charged the debit interchange and network fees. The cost to process a transaction on the debit network will still vary much like with different credit cards, as different debit card issuers charge different amounts for each transaction, but these fees can be notably lower than the interchange fees you would pay on the credit network.
Customers will be required to enter their PIN, so it's important that they know their PIN in order to successfully complete the transaction. This may sound obvious, but since most American consumers aren't accustomed to entering a PIN for any of their transactions, many people may not know or remember their PIN.
What Does This Mean for my Business?
Now that customers don't have to select which network to use, customers will automatically be taken to the "Enter PIN" screen on the terminal once they insert their debit card, cutting out one step in the checkout process. This will invariably cut down on checkout times, which, of course, benefits both you and your customers.
You may encounter some customers who may be confused by the PIN prompt, as they may not be used to having to enter their PIN for a debit transaction. This is especially true since debit transactions are often routed through credit networks. However, if they own a debit card, they should be familiar with completing ATM transactions with their PIN, and checking out with a PIN is no different than validating an ATM transaction with a PIN. If customers express any frustration or discomfort with entering their PIN, you can always reassure them that entering their PIN is a more secure verification than a signature, making the transaction more secure.
Ultimately, both a debit and a credit network selection will result in a completed transaction (as long as the customer has the required funds in their account), but routing through the debit network will lower the cost to your business for processing the transaction and protect you from fraud, so it's in your benefit to encourage your customers to process transactions using the debit networks.
How to Override the PIN Requirement
If your customers do not regularly use their debit card, or if they are used to their debit card being processed on the credit networks (which only requires a signature for verification), there is a chance they may not know or remember their PIN to complete the transaction. If this is the case, or if for some reason you want to process the transaction on the credit network, you can follow the steps from this support article.