This section explains the common ways in which a card present transaction is accepted; an acquiring bank will be able to provide further details on all variations.
A transaction is described as being ‘card present’ when the cardholder and the card are present at the same time. Where the card presented is a chip card then it is placed into the terminal. If a card does not have a chip then the magnetic stripe on the reverse of the card is swiped through the terminal.
Chip and PIN
Now that chip and PIN is fully rolled out in the UK, the majority of UK issued cards will be processed as chip and PIN transactions.
When accepting a chip and PIN enabled card, it is placed into a PIN pad or terminal and prompts are provided on the action required. In most cases, the customer will enter their four digit PIN, or Personal Identification Number, into the terminal or PIN pad – there are different procedures required for chip and signature cards and these details can be found below in the chip and signature section. When an authorisation has been given, the merchant is protected from the cardholder claiming they did not take part in the transaction and the card issuer charging back the transaction. However, this is not a defence against a chargeback if the goods or services supplied are not as described or are faulty.
In addition, when a merchant accepts a chip and PIN transaction that has been correctly processed, as advised by their acquiring bank using a compliant chip and PIN terminal, a merchant may benefit from a liability shift should a chargeback be raised because the card is lost or stolen.
Chip and Signature
There are a small number of chip and signature cards that have been issued to some disabled customers who have difficulty using a PIN. As with a chip and PIN card, these cards should be inserted into the terminal and a merchant will then follow the terminal prompts on what action to take next. In most cases, this will be to request that the cardholder signs for their purchase. A merchant will need to carry out security checks such as “does the signature match the one on the back of the card?”.
Contactless
Contactless technology is a new feature being introduced on many credit and debit cards, commencing in autumn 2007 in London for transactions of £10 or less. It works by the cardholder holding their contactless enabled card up to a secure reader to make their payment. This provides a fast and effective alternative to cash that can reduce queues, and utilises the security built into a chip and PIN card. Though using a contactless card will not usually require a PIN to be entered, from time to time, the terminal may request that the transaction is processed as a standard chip and PIN transaction as a security precaution.
More information is available from either MasterCard www.paypass.com or Visa www.visapaywave.co.uk
Magnetic Stripe
There are still a small number of UK issued cards in circulation that are not chip and PIN enabled and only have a magnetic stripe; this is the same for many foreign issued cards. To process a transaction using this type of card, a merchant will need to swipe the card through their terminal and follow the instructions provided to complete the transaction. As part of the process, a merchant will require the cardholder to provide a signature on the terminal receipt to authorise the transaction. In the case of a fraudulent transaction – for example, a forged signature - different chargeback rights exist for this transaction type compared to that for a chip and PIN transaction.
PAN Key Entered
PAN key entering is where a merchant key-enters a card transaction into their terminal. This may be because a merchant finds that their terminal is unable to read a card’s details when it is placed in the PIN pad or the magnetic stripe is swiped; or they may be processing a card not present transaction. In these situations, assuming the terminal has the capability and the acquiring bank has agreed that a merchant can process this transaction type, a merchant can PAN Key Enter the Primary Account Number (PAN) and other card details into the terminal.
When PAN key entering a transaction, a merchant manually enters the requested card details into their terminal (the PAN refers to the card’s Primary Account Number that is embossed on a card and encoded on the card’s magnetic stripe) – the terminal will prompt them at each stage. An acquiring bank will provide full details on processing this particular type of transaction.
Paper Voucher
Where a merchant is processing transactions on paper vouchers, they will be using a manual imprinter or zip-zap machine. A merchant places their customer’s card into the machine with a paper voucher and makes an imprint of the card onto the voucher. The merchant then manually completes the purchase details on the voucher and asks their customer to sign.
An acquiring bank will provide details of when a merchant should use paper vouchers (including which card types cannot be processed this way), the checks that they have to make and the relative security of this type of transaction compared to processing the transaction using the chip on a chip and PIN card.
Paper vouchers can also be used to process card not present transactions and a merchant’s acquiring bank will advise if any special agreement is required, what the chargeback risks are and the correct processing procedures to use.
A MANUAL IMPRINTER
