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Board Member Corner

Why PINless? Why NOT????

As a small-ticket quick service retailer, speed of service is a critical element in the operational excellence we strive to deliver to our 28 million plus customers a day across the globe.  Deployment of credit and debit card acceptance in the U.S. almost 10 years ago was a significant change in the payment experience for our business and our customers.  Within the McFamily, we affectionately refer to this global initiative as “cashless”.  The changes in interaction between our crew and customers while transitioning from cash to plastic did introduce some operational execution and customer experience learning curves.  At the time, customers had to learn to “sign” receipts for certain transactions above a specific dollar threshold or enter a PIN number for debit transactions of any dollar amount. 

That dollar threshold under network “no signature” programs has varied by network over time and has increased through the years from $15 to $25 to the current $50 level, dependent on merchant category.  While the evolution of these “no signature” programs has grown to offer more value in terms of transactional speed to merchants over time, merchant routing choice on debit transactions was somewhat limited for those retailers striving for speed of service.   This routing limitation was primarily due to the enablement of only one network per card/account which offered a customer payment experience with limited friction at the point of sale.  The decision to choose between the cost/benefit of speed vs. transaction price had to be made by those retailers trying to achieve both.  With the introduction of PINless programs by debit networks that traditionally required PIN verification on every transaction, merchants no longer have to make that difficult choice of speed vs. price. 

Now, enhanced routing can simply be determined by price alone.  With the evolution of “no signature” programs and the introduction of PINless programs, it appears that debit networks and issuers have come to accept the idea that certain merchant categories and transaction amounts have limited to no risk in the value chain and, therefore, cardholder verification is not necessary even in a mag stripe environment.  With the introduction of dynamic authentication, the value of signature as a cardholder verification method continues to erode.  However, until the magnetic stripe retires, merchants in certain low ticket, high volume, speed conscious environments can and should take advantage of every opportunity presented to reduce friction at the point of sale…especially if it also offers enhanced routing choice.   Take time to discuss with your acquirer and POS terminal providers about their capability of providing you as their merchant client with PINless and enhanced routing choices.   As a merchant community we must expect and even demand our partners to offer services that help reduce costs and leverage opportunities in the marketplace.

Laura Ermer, Board Member, Merchant Advisory Group