Card Verification in Retail Transactions: What is it and why does it matter?

Cardholder Verification Methods (CVM) are how the consumer authenticates their identity for the payment transaction. For a time this was largely perceived as:

Credit = Signature 

Debit = PIN

But with the shift away from signature-capture transactions paired with the increased use of digital wallets — like Apple Pay or Google Pay—and the impact of COVID, to say the payments landscape is changing is an understatement.

Let’s dive into the changes that will affect telecom businesses and how your stores can prepare, shall we?

How is a Verification Method Chosen?

Every EMV (chip) transaction begins with a conversation between the card and the terminal. Every type of card (ex Visa Credit or Visa Debit) is considered an application, and every application has its own set of instructions.

Did you know iQmetrix supports over 20 different credit and debit applications?

When a card is inserted or tapped, the list of application(s) on the card is matched to the terminal. Then the card instructions are reviewed. These instructions include:

  • How large can the transaction be? Sometimes a transaction is small enough (under a pre-determined amount) where the transaction doesn’t need additional verification for the payment to be successfully processed.
  • How is the transaction verified?

The terminal will list everything it supports, and the card will list everything it supports. However, while the terminal is happy to support anything that matches, the card has its options listed in a specific order. These options and the order are set by the card manufacturer.

A card could say:

I prefer PIN, but if not

I prefer signature, but if not 

I will accept no verification

Where if the terminal supports PIN, PIN will match. If the terminal doesn’t support PIN, a signature would be used instead.

When digital wallets (ex: Apple Pay, Google Pay) are used, the verification can be completed in-app using biometrics (fingerprint or facial recognition) or password authentication on the phone. An indicator is sent to the terminal identifying that the transaction was verified by the user rather than the device having to read verification preferences.

Is Signature Capture Out?

Over the past few years, card brands have increasingly advised that the signature provided at the time of payment will not be accepted as sufficient evidence when disputing a chargeback. Many card brands are now saying this applies to EMV & swipe transactions for retail environments.

The impact of this is appearing in a few different ways:

Increase in PIN: Traditionally seen as debit-only, PIN verification is becoming increasingly common on credit transactions.

Signature Optional: Card brands are advising a signature won’t play a factor in winning or losing a chargeback dispute, and many merchants are making this requirement optional. iQmetrix supports the ability to skip signature capture at the time of the transaction.

Merchants, processors, and POS providers are often asked: why not remove signature as an option altogether? Well, it’s not as simple as you might think. Here’s why you need signature capture on…

…the payment terminal. Terminals go through a certification process with every card brand; the certification requires that the terminals still support the ability to capture a signature.

…from the credit card brand. Every bank that issues cards determines the verification methods that are supported. While many issuers are prioritizing PIN, many are still issuing cards that say I want signature first.”

This combination of terminal and card support for signature means that signature still comes up in stores. iQmetrix supports the ability to bypass this signature collection per invoice while still satisfying the need to have signature capture available. 

Impact of COVID

The COVID-19 pandemic has driven the industry to consider alternatives that help reduce touchpoints within the physical store space. Some of these initiatives include:

Increased transaction amounts before verification are needed.

The credit card brands have increased the dollar amount of transactions that can be approved without verification. This reduces the need to physically interact with the terminal.

Taking orders outside with curbside pickup.

Many merchants are moving towards a buy online, pickup in-store (BOPIS), or curbside pickup option to provide the service of in-store retail but the distanced safety of online purchases. Digital wallets (Apple Pay/​Google Pay) are a popular payment method for these transactions to make the process even more contactless. The cardholder identity can be verified through a distanced interaction such as looking at a driver’s license or the original payment method to confirm the last 4 digits when the customers arrive at the store to pay.

Push towards digital wallets.

How do digital wallets work? As well as use for online sites, digital wallets allow cardholders to verify transactions without interacting with the payment terminal. Digital wallets like Google Pay and Apple Pay allow cardholders to use biometrics or passwords to verify transactions directly through the phone; the payment terminal receives an indicator saying the verification has been met and proceeds with the transaction.

Want to explore an all-new method of payment that meets the needs of today’s modern telecom retailer? Pay Anywhere is the latest product release from iQmetrix that will be launched in November. See how your store can extend the reach of transactions, reduce dependency on hardware terminals, and maintain the customer-retailer relationship your store is known for.