Continuing on the topic of PIN authentication there is another area worth diving into that fundamentally adds vulnerabilities to the card ecosystem… namely a process called PIN entry bypass, whereby the requirement to enter the PIN during a card-present transaction is skipped.
PINs are a critical layer of authentication in F2F transactions in the same way that 3DS is in e-commerce transactions. It may therefore seem odd or even counterintuitive that there are instances where this safeguard can be circumvented!
Essentially, in order for a terminal to prompt for a PIN when a customer uses an EMV card (chip and pin card), both the terminal and the card must be configured to allow the PIN entry. There are different scenarios why a POS terminal may not prompt for a PIN entry:
◾The terminal is not set up with the functionality
◾The card used does not support chip and PIN
◾The terminal supports the PIN entry bypass option
The guidelines around this PIN bypass process are defined in the EMV specifications. When a customer bypasses the PIN, it triggers a transaction indicator informing the issuer. This process, of course, bears some important considerations around liability and fraud exposure for the parties involved.
Whilst the EMV migration is a global mandate, a PIN entry bypass has historically been implemented in markets 𝐨𝐧𝐥𝐲 on a temporary basis (e.g. during a migration transition). In the US, however, where I first encountered this, it’s not uncommon to see a PIN bypass option on POS terminals. Card swiping and signature-based verification are also more widely used there compared to other markets.
Card issuers adopt different approaches to PIN bypass, e.g.:
◾Issuers may provide a grace period at the cardholder level, during which transactions can proceed without the PIN entry. After this period, the PIN will be required, or the transaction will be declined.
◾Some issuers use a risk-scoring model that evaluates factors such as the transaction location, Merchant Category Code (MCC), card type, and more to decide whether to allow PIN bypass.
◾While this process supports merchant routing choices, it comes with potential downsides such as issuer declines, lost sales, and increased exposure to fraud.
👉🏽#Paymentexperts, any perspectives to add on #PINbypass ?
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