Many clients ask us how to encourage their customers to enter in their pin number when making a purchase with their debit cards. Consumers may wonder what the deal with the pinpad is and rarely ask merchants why they want the pin number. The difference between pin-based or "online" debit and "offline" debit where the debit card is run like a credit card can be huge. Usually a pinpad is recommended for merchants that have an average sale upwards of $40 because the fixed pin-debit cost becomes less expensive than the variable offline debit cost. For a merchant with sales that far exceed an average of $40, like a jeweler or transmission service shop pin-debit can be extremely valuable. Merchants can pay a fixed cost of $1.35 where they might otherwise pay $20.00 on a $750.00 sale without the pin number. The merchant also generally avoids the potential for a chargeback, or credit card dispute, from the customer because the transaction is instantaneous rather than delayed for a day or two.
The media is consistently driving customers to avoid using the pinpad because of rising debit fraud. There may be no recourse for consumers whose pin number has been stolen.
So how do both sides of a transaction, the merchant and the customer, reach a happy medium?
1. Merchants should be upfront with their customers and let them know that if it is all the same to the customer that they should enter their pin number to keep the price of the products and services down helping the merchant avoid excess fees. Merchants should also train their staff to do the same as we constantly see educated merchants and uneducated employees who cost merchants a lot of money.
2. We recommend that consumers who are uncertain of a merchant or are in an unfamiliar city should be cautious and do without entering their pin number and consumers. We recommend repeat buyers at a local small business give the merchant the benefit of the doubt and use the pinpad.
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