PINless Debit: Opportunities & Implementation Challenges Your source for payments education PINless Debit: Opportunities & Implementation Challenges KATIE

Speakers Calvin Chen Payment Partnerships Google Katie Franklin Director, Payment Services Emerging Payments, Global Treasury Walmart Inc. KATIE Jordan Navarro-Abreu Commerce Relationship Manager – North America Microsoft

Agenda What’s PINless? Why PINless? Implementation Performance KATIE Performance Networks

What is PINless Debit Routing? Multiple alternate card networks in the USA which only process debit cards (NYCE, STAR, PULSE, etc.) Historically required a PIN and worked for purchases at physical merchants POS, gas stations, ATM machines, etc. Branched out to card present merchants for small amounts Have expanded to eCommerce: no PIN required, any amount KATIE PINless debit routing / Signature transactions Durbin impact - at least 2 bugs Bugs on the card - provide multiple routing options 1 2 3 4

Why Consider PINless Debit Routing? Reduced Fees Regulated debit fees $0.22 + 0.05% vs Visa debit keyed fees 1.65% + $0.15 Higher Auth Rates Rates vary, but industry quotes: 1% - 5% Depends on business Redundancy Aligns incentives by Networks Maintains a healthy relationship between merchant and Network Possible subsidy to use credit rails (but don’t forget about auth rates) KATIE PINless debit routing / Signature transactions Durbin impact - at least 2 bugs Bugs on the card - provide multiple routing options

Roses and Thorns? Processing Costs Approval Rates Network Redundancy Costs are less than card brands such as Visa and Mastercard in most cases Approval Rates Improved approval rates – particularly on one time purchases Network Redundancy Additional processing path for debit cards Instant Retry Built in instant retry: Debit declines retried on credit rails JORDAN

Roses and Thorns? 01 Debit networks are still working to understand eCommerce 02 Data handling - not every issuer supports the ‘basics’ (ie. AVS/CVV) 03 Digital chargeback representment is not the standard 04 Insufficient network rules and protections for merchants JORDAN 05 Inconsistent acceptance by issuers

Paths to Implementation Most major PSPs offer a PINless solutions, however: Your impact is correlated to their level of experience Make sure their product supports your type of business Debit networks themselves (or parent companies) in many cases also have their own front end for connectivity also for multiple debit networks JORDAN we all talk about experience with our existing PSP’s

Implementation Considerations It is critical that for implementation the merchant is very clear on the following to understand what the impact could be: Types of transactions (recurring, 1X, P2P) and the customers behind them Your existing mix of debit cards. Not all qualify for the lower rate or can go be processed by EFT networks What data elements are being sent (ie. AVS/CVN) and how are they used by the acquirer, network and issuer Does the provider support retries on other EFT or the credit networks JORDAN

Implementation Considerations Contact with key networks is helpful because: Explain what your business does, this type of level setting is critical especially where eCommerce may not be fully understood You should negotiate the rates directly (ie. interchange, switch, exception items, that are usually pass through for a PSP) Understand chargeback representment rules and processes Understand what it is that the PSP is sending through with more clarity JORDAN

Multi Capture/ Single Auth Network Capability Network eCommerce Enabled Single Message Dual Message Multi Capture/ Single Auth AVS/CVV Rules STAR  NYCE PULSE Accel KATIE Single Message: Single Auth/Capture message (recurring/digital fulfilment billing) Dual Message: Separate auth and capture messages (traditional eComm retailer) - each network supports dual message in some form Multi-Capture/Multi-Ship: AVS/CVV Rules: Provide merchant with liability shift for transactions where the issuer did not validate the merchants AVS/CVV validation request ***STAR transitioning platforms and new platform does not support multi-capture, works for WMT because we consolidate completions NYCE – rules? ________ Discuss with your PSP about the applicable transaction type and what they can support by network: Bill Pay Higher BIN eligibility Potentially lower fees Dual Message eCommerce Lower, but growing BIN eligibility Integration type may mirror your existing business Split Ship Most volume is likely to be with Star & Pulse but this could vary based on the merchant card demographic. Ask your PSP to audit your BINs against the PINless BIN file to estimate the routing and impact.

Implementation Considerations REPORTING What reporting is available specific for PINless transactions? 01 REPORTING PERFORMANCE Is it easy to differentiate performance from standard credit card transactions? 02 EXAMINE THE IMPACTS PERFORMANCE 03 CHARGEBACKS CALVIN CHARGEBACKS How will chargebacks be handled?

Measuring Performance The main KPIs are around Approval and CB rates and Fees Auth: Delta in credit and EFT rates by transaction type. Track retries on other EFT or credit network! You want to see the waterfall Fees: Delta between EFT networks and the credit networks. Include CB, refund and retry fees/rates Chargebacks: Track both digital/paper. Have a way to incorporate the latter’s data in your risk models Realized cost savings - How are you tracking ongoing savings? Are there surprise fees being charged for exception items, etc.? CALVIN

Specific Merchant Experiences PERFORMANCE EXPERIENCE COST SAVINGS TYPE OF VENDOR USED OPERATIONAL ISSUES CALVIN - EVERYONE

Key Takeaways Pinless debit is a solid alternative for processing debit card volume. There are true advantages that are measurable and a plus overall for the business. Advantages should be carefully weighed against the negatives and help set proper expectations. CALVIN

Questions? CALVIN - EVERYONE

Thank you! Don’t forget to submit your session evaluation! Calvin Chen Payment Partnerships Google Katie Franklin Director, Payment Services Emerging Payments, Global Treasury Walmart Inc. CALVIN Jordan Navarro-Abreu Commerce Relationship Manager – North America Microsoft