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FAQs
Please click on the headings or questions below for answers to the most commonly asked questions on various Chip & PIN topics.
If the answer to your question is not there, please email the HCIMA and we will endeavour to answer your query as soon as possible: Email: marketing@hcima.co.uk
In an effort to help the hospitality industry in particular to come to terms with Chip & PIN and the changes required in the acceptance of cards in the hospitality environment, the card acquirers have updated the documentation they produce for the hospitality industry, so you should ensure you have the latest documentation. This is particularly important as it also covers the changes required, now that Track II data can no longer be stored.
No Chargebacks?
Q: I am not getting the chargebacks so do I really need to invest in Chip & PIN?
Aesthetics of the Hardware
Deposits
Q: With the introduction of Chip & PIN, what are the standard procedures for handling deposits?
What is Pre-Authorisation?
Q: Is there Scheme recognition of pre-authorisation in non-hotel and car rental environments?
Pre-Authorisation and Maestro Cards
Q: What are the Card Scheme rules with regards to pre-authorisation?
Express Checkout
Q: Hotel groups want to know what exposure to chargebacks they face if the final bill is not PINNED.
Walkout - Hotel and Car Hire Only
Q: Out of the £120. What is authorised?
Q: When would the cryptogram be created and would the establishment be liable under Liability Shift?
Q: How is a Chip & PIN transaction completed if the customer leaves without checking out?
Liability Shift and Fallback to Signature - PIN Day
Q: When would the cryptogram be created and would the establishment be liable under Liability Shift?
Q: How is a Chip & PIN transaction completed if the customer leaves without checking out?
Q: What protection will they have against chargeback?
Chip and PIN guide for guests - questions answered
Q: Why do I have to enter my PIN when I check in?
Q: Why is the establishment now pre-authorising an amount?
Q: What does pre-authorisation commit the cardholder to?
Q: How is the amount for pre-authorisation normally calculated?
Q: What if the guest does not know his/her PIN?
Q: Does the guest have to visit the desk when he/she checks out?
No Chargebacks?
Q: I am not getting the chargebacks so do I really need to invest in Chip & PIN?
A: Initially Liability Shift only applied to the EMEA region, not to cards issued world-wide, during 2005, merchants who had a large number of customers from countries outside EMEA were not seeing either the Chips on the cards or chargebacks. Now that experience is changing as more and more chip cards are being issued within the EMEA region and as more countries around the world are also seeing the introduction of Chip & PIN and thus have begun to come into liability shift in 2006, 2007 up to 2010. So as Chip & PIN is maturing and everyone has started to come to terms with the service, there is no doubt that non chipped environments will see the migration of fraud and consequent chargebacks.
Aesthetics of the Hardware
Q: Some merchants were concerned about the aesthetics of acceptance hardware, particularly in a hotel environment.
A: When Chip & PIN was first introduced part of the rules and regulations behind setting up the Chip & PIN EMV standard was to provide consistency to the customer. So PIN pads have a common layout, and consequently cannot be altered.
Deposits
Q: With the introduction of Chip & PIN, what are the standard procedures for handling deposits?
A: The Card industry responded:
- If the cardholder is present when the deposit is processed it is handled like any other Chip & PIN transaction.
- If the cardholder is not present it is processed as a “customer not present” transaction and is subject to the same standard chargeback risks as it is today in a magnetic stripe environment. The actual introduction of Chip & PIN has no impact on this transaction.
What is Pre-Authorisation?
Q: Is there Scheme recognition of pre-authorisation in non-hotel and car rental environments.
A: Response from the Card Industry “"No. Pre-authorisation is only allowed in Hotels and Car Rental." But through the work of the forum a compromise has been reached to allow Tabs to be handled in F&B. See "ongoing work" and "Tabs".
Pre-Authorisation and Maestro Cards
Q: What are the Card Scheme rules with regards to pre-authorisation?
A: You cannot complete a pre-authorisation in a hotel and pay at check-out if payment is by Switch [Maestro] or Solo. Full payment has to be taken up front. This needs to be clearly understood, as a lot of people, particularly leisure guests at weekends, use Maestro.
In a letter received from Shara Ross, General Manager and Director, Hotel Felix, the following was highlighted:
- "We are experiencing problems with debit cards which cannot be pre-authorised on check in. It means that we have to take full payment on check in (which people in the UK are still hesitant to do unlike in the US) plus we have to take a further amount (we take £50) to cover any extras, refunding any unspent amount. Then of course there is the issue with making the funds available again on their account, because although we process a refund, the available funds are not adjusted in real-time. The available funds on the account are only adjusted when the credit is actually processed to the account."
- "Customers are either fumbling through all their cards at reception (most don't even realise which are debit and which are credit) and they get very 'shirty' at having to search for a card or having to pay full amount plus some for extras up front. The forum is still trying to get this issue addressed and resolved."
- "Often guests do not have any other card when they check in and we are forced to put through a charge, of say £50, and treat it as a deposit. This does not guarantee that a guest will have the funds to settle the final bill which could total several hundreds of pounds if staying a couple of nights and dining each night."
- "A pre-authorisation on a credit card helps ensure that the customer has the funds. I see the only way forward is to charge the customer for their complete accommodation bill on check in. Of course this is something that several chain hotels have been doing for many years but as a hotel that tries to set itself apart by offering very personal service I believe that it will create a lot of ill will with our customers. Many understandably do not want to pay in advance when they have not even got as far as seeing the room."
Maestro Response
A: "As a matter of policy, a pre-authorisation cannot currently be undertaken if a UK issued Maestro (Switch) or Solo card is presented, although it is possible to undertake a pre-authorisation if a non-UK issued Maestro card is presented."
"Merchants should, if they have not done so already, contact their Acquirer for advice and information on how to easily identify and manage Maestro cards. The UK position is regularly reviewed, and we would welcome input to the debate from the merchant communities affected."
If this is causing an issue to a number of hotels, please write to the HCIMA Forum, as Hotel Felix has done, and we will pass your concerns direct to Maestro. If you want this changed you the industry need to vocalise your requirements to both your bank relationship managers and in writing to the Forum so that the issue can be addressed
Pre-Authorisation with all the other cards continues as pre-Chip & PIN - the PIN is used instead of the signature.
Express Checkout
Q: Express Checkouts – PIN captured at check-in but not available at checkout – what is the impact of this?
Q: How are express checkouts handled with Chip & PIN? Normally the invoice is just put under the door and the cardholder confirms acceptance of the folio on the TV or drops a signed copy of the receipt at reception.
Q: Hotel groups wanted to know what exposure to chargebacks they faced if the final bill was not PINNED.
Walkout - Hotel and Car Hire Only
If a pre-authorisation is completed for X (£50) the transaction exceeds the pre-authorisation and the guest or customer leaves after the transaction is Y (£120)
Q: Out of the £120. What is authorised?
A: Chip & PIN does not impact the process. However, what has changed is that we can no longer store track II data after the initial authorisation has been completed.
A top-up authorisation request would be completed as before for £70.00. But now for both integrated solutions and on bank owned terminals, the PAN {Card number} and expiry date, start date and issue number ,if required, rather than Track II data will be used in Top-up authorisation requests.
Q: What is received?
A: The full amount presented in the final transaction will be credited to the merchant.
At an APACS meeting in February 2006, the process was clarified further.
- All participants in the payment process should strive to have the final transaction amount pinned.
- If a full Chip & PIN transaction cannot be done [ Express Checkout or a Walk Out], then the last Chip & PIN cryptogram should be used. A full Chip & PIN transaction can occur at any time during the life of the transaction - at check-in or during the stay, but regardless when done the last or latest cryptogram should always be used in the settlement record with the final settlement amount.
- All transactions submitted should also ALWAYS include the "last" authorisation code.
This process is fully described in the latest APACS 70 standard.
Liability Shift and Fallback to Signature - PIN Day
Q: When would the cryptogram be created and would the establishment be liable under Liability Shift?
A: A Cryptogram is created whenever the cardholder enters his/her PIN. If the payment is PINNED then liability is completely covered.
- The Acquirers, card schemes and issuers know from the incoming transaction whether it was processed on a Chip & PIN device or a magnetic stripe only device.
- If it is on a C&P device and is PINNED any liability for fraud is removed from the merchant.
- The Card industry has agreed that even if the payment is processed as fallback to signature in a Chip & PIN environment and has been authorised by the issuer, as a fallback, the issuer will take liability for the transaction if it is subsequently found to be fraudulent.
- However, in an effort to force cardholders to use their PIN, rather than fallback to signature, most non pinned payments on a chip card in a Chip environment are already being declined by the issuer during authorisation. That status came about in preparation for "PIN DAY" in February 2006.
Any transaction completion record that contains PIN data, will now be treated as a full chip transaction. This applies regardless of when the chip data was obtained - pre-authorisation, in an interim authorisation request or upon transaction completion. So in an integrated environment to secure a payment for walkout and express checkout, hospitality merchants should always aim to get some portion of the transaction pinned.
Q: How is a Chip & PIN transaction completed if the customer leaves without checking out?
"Merchants using terminals that are not capable of storing and retrieving the chip data, should aim to complete a full EMV transaction at check-out. If the guest has left, the establishment will have to complete a PAN Key Entered transaction."
A: Where data can be stored and recalled, the transaction can be submitted to the Acquirer using:
- the last cryptogram created, usually when the customer checked in and pinned the payment
- the final amount
In the fight against fraud and in compromise to the fact that the Schemes do not want Track II data stored at all, the Forum:
- supports the fact that card data must be protected against compromise and
- supports the need to encrypt stored card data during the life-cycle of the transaction
- supports the need to destroy data after the transaction has been concluded.
- agrees that merchants must no longer hold Track II data in the EFT or PoS environment.
Q: What protection will they have against chargeback?
A: Because of the classification code of these merchants, PAN Key entered data will not be treated as pure "customer not present" transactions, they are now seen as "customer no longer present" or "actually not present". The card industry is doing its best to ensure the merchants are protected from chargeback and if subject to chargeback are given as much support as possible to ensure the funds for genuine transactions are not charged back or removed from the merchant. The merchant can prove the cardholder entered into a contract to pay, based on the pre-registration card signed when he/she signed the registration card at check-in. The card industry will now accept registration cards as additional proof of the cardholders presence in the establishment and as an obligation to pay.
Chip and PIN guide for guests - questions answered
Information an Establishment Should Make Available to the Guest
This document was produced by Hotels and the Chip & PIN office in 2004 and is a useful guide to give to guests, to help them understand the difference in the process with the introduction of Chip & PIN.
Q: Why do I have to enter my PIN when I check in?
A: The hotel needs to confirm to your issuers that you were actually in the hotel. The PIN authenticates the card and the cardholder.
Q: Why is the establishment now pre-authorising an amount?
A: This is because the establishment wishes to indicate to your issuer their intent to debit an amount to your account. This amount is used to cover the cost of your stay (this is sometimes called a pre-authorisation). This has always been done at check in, but in the past you may not have been aware that it was happening.
- You should enter your PIN after the pre-authorisation amount has been shown to you on the screen.
- When you enter your PIN it confirms that you are present and are the valid owner of the card.
Q: What does pre-authorisation commit the cardholder to?
A: Pre-authorisation’ checks to ensure that there are sufficient funds in the cardholders account and ‘ring fences’ the funds against the merchant number. This does not take the money out of the cardholder’s account, but allocates those funds, for a short period of time, to the merchant who makes the authorisation request.
Q: How is the amount for pre-authorisation normally calculated?
A: Normally it is based on the cost per night, the number of nights the guest is planning to stay plus, sometimes, a small percentage to cover incidentals such as dinner or mini bar items.
Q: What if the guest does not know his/her PIN?
A: The hotel may allow the guest to sign instead, but as Chip & PIN becomes more and more common, the facility to sign instead of entering a PIN may be withdrawn on cards that are Chip & PIN enabled. In the interim the merchants choice to allow fallback of a signature is at the merchants risk – there is a risk of chargeback.
Q: Does the guest have to visit the desk when he/she checks out?
A: This will depend on whether the hotel offers express checkout. If the guest decide to use express checkout and has entered his/her PIN at check in, the guest will not have to go to the desk at checkout. However, as currently applies, if the guest has any query what so ever on the bill it may be changed at anytime in association with the hotel front of house staff.