An introduction to PINless debit

Debit card holders have been able to pay without a PIN (or, more simply, PINless) for years. Major card networks – think Visa and Mastercard – handled the transactions, which was convenient for merchants (apart from the hefty debit card processing fees included).

Recently, however, PINless debit is becoming available through other means – namely, by routing the payments you accept through smaller and regional (rather than major and global) card networks.

For these networks – called ‘back-of-card’ brands because you’ll find their logos on the back, rather than the front, of your debit card), their technology has finally caught up to their ambition – and for you, as a merchant, it can lower your costs and boost your approval rates.

So what is PINless debit, and how does it work?

Below, we’ll provide a definition and quick history. Then, we’ll explore PINless debit’s key pros and cons – and how Checkout.com can help you become one of the first adopters of this emerging, exciting way to accept a familiar payment method.

What is PINless debit?

PINless debit is a way of accepting a transaction that involves routing the payment through a regional debit card network – such as Accel, Pulse, NYCE, and Star – rather than one operated by a major global card scheme, such as Mastercard, Visa, or Discover. In these transactions, the customer isn’t required to enter their PIN: making for quicker, friction-free payments.

In a card-not-present PINless debit transaction, the customer simply enters their 16-digit primary account number (PAN), and a combination of their CVV (Card Verification Value) or AVS (Address Verification Service) to authenticate the transaction.

At the point of sale (POS), a customer simply inserts their debit card into your business’s card reader or terminal. As the name ‘PINless’ suggests, the customer isn’t required to enter their personal identification number (PIN) or provide their signature on the sales receipt.

PINless debit: a quick history

To understand PINless debit in full, we first need to take a trip back in time.

In 2010, a piece of legislation called The Durbin Amendment was introduced in the US. Its main effect? Capping the amount of interchange fees that debit card issuers were able to impose on merchants – which, at that time, were averaging 44 cents per transaction – to 21 cents + 0.05% of the sale’s value.

What the legislation also did, however, was mandate that all debit card issuers be able to support at least two regional debit networks (such as Star, Pulse, NYCE, and Accel) unaffiliated with the major global networks (such as Visa, Mastercard, and Discover).

The goal? To make debit card processing more competitive, safeguard against network exclusivity, and prevent major networks from monopolizing the space. But back in 2010, the smaller networks didn’t have the PINless technology to compete with the major card brands – so Visa, Mastercard, and Discover still dominated.

Fast forward to 2024, and the smaller networks do have this tech; meaning the whole ecosystem is changing.

How does PINless debit work?

Essentially, the changes the aforementioned Durbin Amendment ushered in gave merchants the choice between routing debit payments through a global debit card network (the traditional avenue), or doing so through a regional debit card network to access more competitive rates.

These regional networks are also called back-of-card networks (in contrast to their global counterparts, which are front-of-card brands). To see why, simply look at your debit card, and you’ll see Visa, Mastercard, or Discover on the front; turn it around and, sure enough, you’ll spy the logo of one or more back-of-card brands, too.

So – how does this all relate to PINless debit?

Well, traditionally the back-of-card brands that support PINless debit – Pulse, Star, Accel, and NYCE – required the customer to enter their PIN to verify the transaction.

This stymied the back-of-card brands’ growth vis a vis the global card schemes, which have been able to process debit card transactions without the customer having to enter their PIN for much longer. Because many businesses have fast-paced POS situations (where PINless payment’s speed and convenience is crucial, and entering a PIN isn’t ideal), the natural choice was always to route payments through the major card schemes.

Hence, the regional debit card networks fell behind.

Recently, though – and as we outlined in our PINless debit history lesson above – regional (back-of-card) debit networks have developed the ability to offer PINless debit transactions; allowing them to race back into competition with the major card schemes. 

While this won’t necessarily make a huge difference to your customer, routing your debit card payments through regional debit networks, or ‘payment rails’, can offer big benefits for you as a merchant. (We’ll unpack these benefits in greater detail later in this article.)

Signature network vs PINless debit

Thanks to the Durbin Amendment, you – as a merchant – have the ability to route debit card payments through the network of your choice: 

• Signature networks are maintained by Visa, Network, and Discover. They’re the front-of-card networks we discussed above, and process debit card transactions with a signature or PIN; they can also process debit card transactions without a PIN.
• PINless debit networks (or ‘true’ debit payment rails) are the back-of-card brands. These networks are utilized and maintained by a system of regional debit card networks. Traditionally, they’ve required a PIN to verify a customer payment; as of recently, however, they're able to do this through PINless debit technology.

According to Redbridge data, Star (60%) is the regional debit network with the most market share by volume as of 2023, followed by Pulse (20%), NYCE (15%), and Accel (5%).

PINless debit: Benefits for merchants

For your customers, PINless debit card transactions have obvious benefits in terms of speed and convenience.

Not having to enter their PIN when shopping at your business’s bricks-and-mortar store – and experiencing fewer frustrating friction points when they go to checkout online or in-app – are important benefits for your customers.

But what about you, as a merchant? Let’s take a look at some of PINless debit’s key drawcards.

Lower fees

PINless debit allows you to enjoy lower costs than you would with a transaction routed through a signature network such as Visa, Mastercard, or Discover.

In fact, the average online merchant can expect to save between 20% and 30% on interchange and assessment fees (those costs levied by the major card brands) simply by optimizing their PINless debit routing. As a merchant, you may also be able to negotiate extra network rebates and incentives on top of this to cut even more costs.

Increased performance

The ability to process the same card on two different networks – signature and PINless debit networks – allows for another layer of routing decisioning that, if used correctly, can optimize your payment strategy’s performance, and lead to increased transaction approval rates.

By smart routing between a signature and PINless network, you can ensure that, if a transaction is declined through one channel, it can be, seamlessly forwarded to the next available channel for approval. (This is a process known as cascading.)

Early adoption

PINless debit is an emerging – and, as a result, still relatively underappreciated – development in the payment industry.

That means that it isn’t yet too late to capitalize on the advantages of early adoption and pilot project participation as PINless debit makes its gradual way into the mainstream – and to demonstrate your business’s status as forward-thinking and open to new ideas and methods.

Remember, history suggests that early adopters always see the biggest benefits – and merchants that are quickest to embrace PINless debit will surely etch their names into it.

Potential drawbacks

With those key benefits of PINless debit do come a few challenges to consider. PINless debit is, after all, a relatively new way to pay – so some teething problems are to be expected.

Risk of fraud

With so many different types of payment fraud out there – and the global estimated revenue losses of 3.6% it causes – your business needs to stay alert to cybercriminals’ growing threat.

Right now, PINless debit unfortunately doesn’t support 3D Secure – a security protocol common, and well proven, in debit card transactions processed through the signature networks backed by schemes such as Visa, Discover, and Mastercard.

This means that card-not-present PINless debit transactions could pose more of a fraud risk – albeit one your business can mitigate with a robust, AI-powered fraud prevention toolkit, such as Checkout.com’s Fraud Detection Pro solution.

Shifting PCI compliance requirements

Another payment security feature not included in PINless debit transactions is network tokenization. This process secures the debit card payments you accept by replacing the cardholder’s details and PAN with randomly generated alphanumeric strings of data.

These ‘tokens’ act as surrogates for the real data: preventing them from theft in case your systems are hacked and that data leaked to cybercriminals. By successfully masking your customers’ card details, tokens also play an important role in helping you fulfill your PCI compliance obligations.

Without the ability to tokenize PINless debit card transactions, your PCI compliance requirements could shift – so it’s important to start the conversation with your payment service provider as early as possible to find out how this could affect your business’s responsibilities.

Early dangers

While early adoption is – as we’ve highlighted – important, it’s also vital not to lock yourself into a long-term contract too early in the piece.

After all, the last thing you want to do is be among the first to adopt PINless debit, but – in signing an inflexible, long-term arrangement – end up paying more than later adopters as new, more affordable ways of processing PINless debit transactions arise.

So ensure that the payment service provider you choose to work with has its finger on the pulse of emerging industry developments to enable you to accept PINless debit payments in a way that’s sustainable; and that can bend, rather than break, as the sector evolves.

Process PINless debit payments with Checkout.com

Here at Checkout.com, we’re always working hard to keep our merchants in the loop. We have, for instance, reported on the latest payment developments – such as the recent launch of FedNow – and foretold the future of real-time payments.

In that vein, we’ll soon be launching PINless debit to our merchants in the US. This will allow you to accept PINless debit transactions, and enjoy the benefits it can have for your business’s wallet and approval rates – as well as your reputation as an early adopter of technology that will provide your customers with a faster, more convenient payment experience.

When you process PINless debit card payments with us, we’ll also help you route your payments through the most cost-effective network: ensuring you avoid paying unnecessary fees, and drive down costs through expertly cascading your debit card transactions.

To find out more about PINless debit – and learn how Checkout.com can help your US-based business process this emerging, reinvented form of payment – get in touch with our team of experts for a friendly, no-obligation conversation.