EMV Debit Routing Overview
Complying with the EMVCo requirements, card network requirements and meeting the Durbin Amendment debit routing regulation (Regulation II), while managing debit card processing costs can be a daunting challenge for merchants. Once merchants have determined how they choose to balance these sometimes conflicting inputs, the challenge is then how to implement the desired solution on Verifone systems.
The implementation of EMV debit at some U.S. retailers has resulted in confusion to consumers when presented with multiple debit selections on the payment terminal. In addition, the
consumer payment experience can vary by card and merchant. Some Verifone retail Client Advisory Council early adopters of EMV in the U.S. have seen significant declines in the percentage of debit transactions using PIN versus signature, and resulting debit card routing to global networks versus regional debit networks has caused merchants to see an increase in debit card processing fees.
The purpose of this document is to explain the requirements and regulations so that our clients can make informed decisions when deciding how to handle EMV debit card acceptance and routing and then present merchants with optional configurations for Verifone systems to meet those needs. Smaller merchants will need to consult with their merchant service provider for guidance.
Pre-EMV Debit Processing and Routing
In the U.S. pre-EMV, in the magnetic stripe environment, some merchants offered cardholders the ability to choose how their debit card was processed by displaying a “select payment type” screen which would display credit and debit options as the first step in the consumer process. If the consumer selected credit and then swiped or tapped a debit card, the terminal would prompt the consumer to provide their signature (processing as a debit signature transaction). If the consumer selected debit and then swiped or tapped a debit card, the terminal would prompt the consumer to enter their PIN (processing as a debit PIN transaction).
The actual routing of either transaction would be determined by either the merchant’s switch, if they had one, or their processor/acquirer based on their processing contract.
Other merchants simply asked the consumer to swipe or tap their card and used BIN look-up to determine if it was a credit or debit card. Based on the look-up result, the consumer would be prompted to either enter their PIN or signature. If the option was unknown, the consumer would be prompted to select debit or credit as described above.
Requirements for Processing EMV Debit
EMV debit adds new complexity. The EMV card now determines certain things within the EMV Chip, such as whether the transaction can be processed with signature or PIN. This was previously determined by the merchant’s POS or by the consumer selecting either credit or debit. With EMV, the card makes the determination as to whether signature or PIN will be re-quired in conjunction with the merchant’s payment terminal.
The Durbin amendment1 requires that all debit cards need to participate in at least two
unaffiliated networks so that transactions initiated using those debit cards will have at least two independent routing channels. The two unaffiliated networks could be one regional debit network and one global network (the most common configuration), two unaffiliated global networks or two regional debit networks (in each case so long as the two networks are not affiliated).
As the EMV card chip needs to communicate with the payment terminal, the payment terminal needs to understand what applications the card contains. To identify the application, an
Application ID, or AID is used. The terminal uses the AID to select between different applications on the card. Once the correct application is selected, the transaction begins.
In order to meet the Durbin requirement that all debit cards have the ability to be routed over two distinct and separate debit networks, the industry adopted the approach of a Common Debit AID, in addition to a card brand debit AID (called a Global AID). The Common Debit AID can be used with all non-brand US debit networks such as NYCE, Pulse, STAR, Shazam, AFFN, etc. Each AID has a list of acceptable Customer Verification Methods (CVM), which may include PIN, signature or no CVM, listed in the priority the card issuer prefers. Terminals also have a list of CVM’s they support. As not all cards are issued with PINs and not all terminals can accept online PIN’s, or are located where a signature is not feasible (i.e. a vending machine). The payment terminal and the card use the highest priority CVM on the card that the payment termi-nal supports.
Because different types of terminals support different CVMs, multiple CVMs on the EMV card ensure EMV card acceptance at as many merchant terminals as possible. The card and the terminal simply use the first matching highest priority CVM type on the card to authorize a transaction. For example, if an EMV credit transaction calls for PIN entry but no PIN pad is present, the chip might default to signature CVM instead (If this CVM was allowed by the card issuer). Note that with EMV, there are credit cards that prefer PIN as the CVM. This effectively makes offering the consumer a choice of credit or debit, or signature or PIN moot in the post EMV environment, as the card issuer determines what is supported.
Cardholder Debit Selection
To support cardholder selection of the debit routing network, if the debit card has multiple AIDs the payment terminal should display the AID labels provided by the EMV card on the screen for the cardholder to make the choice. These labels are defined by the card issuer and will always be displayed in the order defined on the card by the card issuer. The CVM used is determined by the priority of CVMs supported both on the card and on the payment terminal.
In practice, this does not provide clear choices to consumers because the AID labels are similar and not clearly understood by consumers. Generally the consumer sees one of the following on the payment terminal after inserting their EMV card: (tapping should default to NO CVM)
Visa Debit MasterCard Debit
US Debit US Debit
The first line is the card brand Global AID label, while the second line is the Common Debit AID label. Consumers do not know what US debit is as there is no US debit network, but consumers may be familiar with regional debit networks like NYCE, Pulse, AFFN or other debit network logo in addition to the card brand logo.
However, this is not the only choices consumers may be presented with. We have seen US debit replaced with USA debit and in some cases both consumer AID options are labeled Mas-terCard Debit, or Debit MasMas-terCard.
The card brand debit AID (global AID) must be routed over the card brand network normally us-ing signature as the CVM. This causes a drop in PIN debit transactions routed over a regional debit network and results in higher debit processing costs for merchants.
Visa guidelines for card acceptance require the merchant to clearly label Visa when presenting a choice for consumers and also routing to Visa if the consumer chooses the network. It does, however, allow a merchant “to steer” a cardholder to another network as long as it does not omit information or mislead the cardholder in doing so.
Chiro Aikat, senior vice president of product delivery for MasterCard has stated: “MasterCard
has no rules in place regarding terminal prompts, but the card brand informs issuers to choose what they want those labels to say. They may want their brand name on those labels instead of saying MasterCard. They can use U.S. Debit for the common AID label because it is the closest you can get to calling it what it is, as it is for the other debit networks in the U.S.” 3
Terminal Debit Selection
Merchants may also have the payment terminal determine the default debit AID. This was included in the EMV requirements primarily for payment terminals that do not have a large enough screen or the ability for the cardholder to select the AID, such as unattended vending machines. However, any merchant can use this option on their payment terminals and should to determine lower cost routing. While the normal AID selection process would be used for credit cards, merchants may choose to select their preferred AID for debit cards. In this case the card-holder would not be given the opportunity to select the debit network and instead the merchant could configure the payment terminal to select their preferred debit network (expected to nor-mally be US Debit as that is lower cost regional network) if that AID was on the card. The CVM used would be determined per normal process.
In this case however, if the consumer is presented with a PIN entry screen, and they want to opt out of PIN entry and use their signature instead, and if the card supports signature as a CVM, the consumer should be allowed to do so using use PIN bypass.
Verifone Solution Debit Routing Options
The options available for merchants to determine debit AID and routing options vary depending on the Verifone system being used. The most common Verifone solutions are listed below. If you use a different solution, or have a highly customized implementation, please contact your account executive or systems integrator to discuss your options.
VX SoftPay Solutions
Verifone’s standard SoftPay solution for the VX terminals are configured to display all AID’s on the card, if there are more than one, to allow the consumer to select their choice. A preferred AID can be configured by the acquirer/processor.
MX Form Agent/XPI Solutions
In Verifone Form Agent/XPI solutions, it is the POS software developer that determines how debit selection is handled. The XPI application and POS interface are capable of handling consumer debit choice, allowing merchants to be credit preferring or debit preferring or always prompting for PIN and allowing consumers to bypass PIN entry if they choose.
MX SCA/Point Solutions
The Verifone SCA/Point solution currently allows merchants to select from the following options for debit processing and routing:
• Auto US Debit Preferred – the most economical debit routing, with most cards being PIN based CVM
• Auto Credit Preferred – for merchants that don’t like asking for PIN, most CVMs will be signature for US issued cards and offline PIN for foreign issued cards.
• Consumer Selection – shows the AID selection on dual AID cards for the consumer to select which AID they want.
An enhancement is planned for SCA to modify the current debit preferring logic to make it more obvious to the consumer how to opt out of PIN entry and use their signature for validation. This change will also then use the Global AID to process the transaction over the card network in-stead using the Common Debit AID debit card via the credit rails to the acquirer.
FIPay Solutions
FIPay allows merchants the ability to filter for the Common Debit AID when multiple AIDs are present on the card with matching Issuer Identification Number (IIN). The IIN identifies the bank that issued the card. Once the Common Debit AID is selected the cardholder would be present-ed with the option to enter PIN or PIN BYPASS. If PIN is enterpresent-ed the transaction is routpresent-ed as PIN based Debit, if PIN BYPASS is selected FIPay will route the transaction as credit over the Visa or MasterCard network as a signature based transaction.
Petro Solutions
Verifone’s ViperPay application on Ruby CI, Commander and Commander 16, do not come pre-installed with a default set of rules. Instead the products will all support providing the sumer with the choice of debit AID’s to be used and the order of priority to be placed. After con-sultation with their acquirer, ViperPay allows a merchant to configure different processing rules according to their retail operational needs.
Summary
While there may be confusion in the market over EMV debit processing and routing options, Verifone solutions are designed to meet the EMVCo, card association and Durbin Amendment requirements enabling merchants to offer the consumer experience they desire while providing
EMV DEBIT ROUTING
VERIFONE.COM
References:
(1) Durbin Amendment Regulation II (Debit Card Interchange Fees and Routing): https://www.federalreserve.gov/paymentsystems/regii-about.htm
(2) EMV Migration Forum U.S. Debit EMV Technical Proposal: http://www.emv-connec tion.com/u-s-debit-emv-technical-proposal/
(3) Visa and MasterCard’s Rules for EMV Explained, Payments Source: http://www. for-emv-explained-3024155-1.html
