Originally Posted by
ajnz
I wonder how open to interpretation that requirement is. In New Zealand I've seen terminals prompting the merchant to allow signature validation instead of PIN. The chip-reading device is the PIN-pad held in the customer's hand (with both chip and mag-stripe reading capability), while the merchant terminal is the POS system or the 'base' of the terminal. This way the customer can't override it, but the merchant can. Presumably their merchant agreement has disincentives for doing so.
Ah, but what you're referring to is different. You're transaction is still being processed as an EMV transaction, however you are simply using a different Cardholder Verification Method (CVM). This is referred to as a PIN Bypass transaction, which was introduced in some markets as part of the EMV transition.
For New Zealand, on page 221 of the same document:
PIN as Cardholder Verification Method in New Zealand – Issuer Requirements – AP Region
In New Zealand, all newly-issued and re-issued Visa Cards must be issued with a PIN as the preferred CVM for Chip-Initiated Transactions.
Effective 1 April 2012, when PIN bypass is performed for a Chip-initiated Transaction on a New Zealand issued PIN-Preferring Chip Card, the Transaction must be sent Online to the Issuer or the Issuer's agent. An Issuer must respond with a Decline Response to a domestic PIN Bypass Transaction
Therefore, PIN Bypass on domestic transactions in NZ will disappear really soon.
In simple terms, an EMV card has a list of acceptable CVMs, in order of preference. This is set by the issuer. Depending on the market, you're card could be set as:
- Offline PIN
- Online PIN
- Signature
- No CVM required
(For the US Chip and Signature cards that are being issued, the list is likely just Signature and No CVM required)
When you insert the card, it will negotiate with the terminal, which will also have a list of acceptable CVMs. The card will basically go one-by-one from its most preferred CVM and if the terminal also supports that, that is what gets used for the transaction. Doing a 'PIN Bypass' simply causes the terminal and card to renegotiate for a different CVM.