USA scenario here: say I have a $2000 car repair bill and use my debit card.
Can’t be bothered to put in my pincode so I hit credit, payment goes through without pincode.
Why does the consumer have the option to pick here?
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The reason is this, debit was built on the processing rails of credit and was pushed heavily by Visa and MasterCard back in its inception. Prior to debit cards, there were ATM only cards and credit cards. When you build a new process in the US where it’s heavily regulated by the government and the Federal Reserve you build on the rails you already have so new regulations don’t have to be written or new process scrutinized by regulators. In addition, the card brands like Visa and MasterCard incentivize the use of their networks with zero fraud liabilities. For a debit card the end result is the same for either transaction but it determines the network that processes it.
There is a recent example where similar circumstances took place, Apple Pay in 2014. Apple worked with Visa and Mastercard to develop a way to randomize a transaction so that card skimming fraud could not occur. They used some existing chip card processing and then randomized the card number. How did they randomize the card number, Visa or MasterCard just gave them a 16 digit number that they had not yet assigned to a bank and that was your virtual card number… but it didn’t work on debit. For the first several years if you did an Apple transaction on debit it failed. Visa and MC had to work with debit networks to have them determine where to process the virtual card. They did that due to complaints and because regulators stepped in and made it a requirement.
As to what other people have mentioned that debit is more expensive to run vs credit, it’s actually the other way around. Merchants prefer debit vs credit because the interchange fee is cheaper. A lot of merchants in fact default to debit processing when the upgraded to chip terminals in 2015 though they are supposed to give the option to run credit.
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