Payment card

Debit card

European Regulation 2015/751 ³ lays down the principles of a debit card. It accepts two modes of operation at the choice of the carrier

• immediate debit and systematic authorization : day-to-day posting to the bank account by the bearer’s bank, with checking of the balance or of the prior authorization before each transaction ;
• immediate debit without systematic authorization (specific to France): day-to-day account assignment to the bank account by the bearer’s bank, with a random authorization request in France for small amounts. Authorization becoming systematic beyond a certain amount (usually € 100 ) or abroad;

Immediate debit card with systematic authorization

A systematically authorized debit card is a payment card that systematically requests authorization ( online transaction ) and checking of the bearer’s account for each transaction, in order to verify that it is sufficiently stocked. If the provision is sufficient, the transaction is accepted and the amount of the authorization is taken into account for future authorizations issuance (like a transaction made by a traditional card that has been the subject of a request for authorization ); otherwise, it is refused.

Depending on the rules established on the card and the settings of the payment terminal, it may be possible to perform a forcing monetary card of a systematic authorization.

In France

It is usually an international debit card, often without embossing (embossed number, used for manual payment via the use of “hooves”).

The most common are:

• cards Maestro and Visa Electron and V-Pay. In France , this type of card is historically offered to customers “at risk” (young people, prohibited banks, customers without regular income, etc. ) but anyone wanting a payment card without the risk of being exposed can request it. The problem in France is that the bearer of this type of card (the only one that is truly secure in France) is “stigmatized”, whether by his banker or by merchants, as “dangerous client”, “not solvent”, “Who does not know how to count,” and so on. ⁴ This is not the case at all in other countries, as systematic authorization of transactions is the rule.

• Since 2011, Visa or Mastercard prepaid cards, which unlike traditional debit cards, are not attached to a current account but to a specific account, also known as a “technical account”.

• In France, the advent of “neo-banks” generalizes the distribution of embossed debit cards, with systematic authorization, supporting payments by chip, magnetic stripe or contactless. These cards do not have co-badging as they use only the international network, Mastercard most often, to support transactions.

This type of card is not incompatible with a credit limit. In this case, it can be used up to the maximum allowed overdraft.

Constraints in France

Insofar as the French electronic payment network has historically been built on a mode of operation favoring offline transactions (without systematic authorization), a constraining use in certain cases is always possible:

• longer transactions at supermarket checkouts, especially at holidays;
• impossibility to use them on terminals that can not make requests for authorization (except coding particular in the track or the chip, allowing an ” offline ” mode , as in the cards of foreign credits). In France, car parks are gradually equipped to accept this type of card. As for motorways, in 2013, only SANEF accepted them at the toll gates. Terminal trains, aircraft or boats in France are unable to carry out authorizations, unlike in other countries;
• refused by car rental companies, poorly accepted in hotels, travel agencies, etc. The fact that the data is embossed on the map (as on some prepaid cards) does not change anything. Foreign Visa or Mastercard credit cards are easily accepted.

Debit card without authorization systematic

The lack of systematic authorization on traditional bank cards is a French peculiarity. The reasons are essentially historical. Indeed, until the end of the 1980s, merchants used essentially a shoe for bank card transactions (colloquially called “Iron”). To make a request for authorization, they had to manually call the authorization center (phone call in the banking jargon), which consequently generated additional costs for the merchant, including telephone communication, and slowed down transactions. For these reasons, manual transactions without an authorization request were guaranteed for small amounts (generally less than 600 F, beyond the authorization became mandatory).

The electronic payment terminal (TPE) are generalized to that in the 1990 First to track and quickly, with smart code entry. The VSEs could carry out the authorizations in an automated way using the telephone line.

Withdrawals, on the other hand, have always been subject to authorization.

However, the lack of systematic authorization was not removed with the arrival of VSEs, always to ensure smooth transactions, and without generating additional costs for merchants. Because the TPEs were connected to the authorization centers by a particularly slow PSTN telephone connection , authorization requests could sometimes take longer than one minute (compared to an average of 3 seconds for a DAB withdrawal), and were particularly expensive. Indeed, the incumbent operator, France Telecom, still having a monopoly at the time, had purely and simply refused to negotiate the tariffs of the communications towards the centers of banking authorization (being all the more special numbers, more expensive than a local number).

However, France is a pioneer in the smart bank card. The transactions were secured by the chip and code entry, the rate of fraud credit card in France were among the lowest in the world, even for transactions without a request for authorization. Today, to reinforce the security of card payments, the introduction of systematic authorization for all payment cards has been mentioned several times, as is the case abroad. more than a license at a much lower cost and is faster than before because of the current connection modes (ADSL, GPRS, etc.). Most traders (especially small businesses with low sales outlets) are reluctant and are opposed to it, particularly for the following reasons:

• a commission is charged automatically for each transaction;
• a transaction with authorization that can last from a few seconds to a half minute will always be a little longer than a transaction without authorization;
• the implementation of the systematic authorization inevitably leads to an increase in the refusal of transactions for certain users, putting both the customer and the merchant in the embarrassment, nevertheless this avoids the two parties a subsequent dispute.

Faced with the increase in credit card fraud in France in the late 1990s (with the famous YesCard , or theft of bank details), the systematic authorization to the first cent was put in place for certain transactions , especially when the visual inspection of the card is not possible (remote sales or payment on PLCs). Thus, payments on the Internet or on certain ATMs (service stations, DVD distributors, etc.) are now almost always subject to banking authorization. The payment on PLCs has therefore become more binding when the amount is not known in advance, it will make a request for authorization for an amount that may be much larger than the actual amount (for example,on a fuel automat). The account must be sufficiently stocked or the authorization refused.

It should be noted that since the beginning of the 2000s, and in order to allow everyone to benefit from a payment card, most French banks market cards with systematic authorization, generally of the Visa Electron or Maestro type, but sometimes Visa or Mastercard type.

Duration of an authorization request depending on the connection mode:

• via a PSTN analog telephone line: approximately 20 to 30  seconds ;
• via a GPRS line: 5 to 10 seconds ;
• via a terrestrial Internet line (ADSL …): 3 to 5  seconds ;
• via an automated teller machine : 2 to 5  seconds .

Virtual Card

A virtual card, or E-card, is a software installed on a computer which makes it possible to obtain all the necessary information for an Internet purchase for example ⁵ . The check is carried out systematically by the bank issuing an authorization sometimes after validation by a code sent by SMS which must be entered on the internet page of the bank ^a . Transactions made by virtual cards are not necessarily debited immediately.

Credit card

Unlike debit cards, whose expenses are debited instantly ^b directly from the wearer’s current account (daily), expenditures with a credit card are debited offline.

European Regulation 2015/751 ³ lays down the principles of a credit card: There are two major categories of credit cards available on the market. With “deferred debit cards”, the cardholder’s account is debited from the total amount of transactions on a pre-determined date, usually once a month, without being charged interest. Other credit cards allow the cardholder to use a credit facility to repay a portion of the amounts owing at a later date than at the same time by paying interest or other fees ³ .

Several repayment methods are generally offered:

• monthly deferred cash (often free), all current month’s expenses are collected at one time. Deferred debit cards are statutorily a category of credit card.
• directly from a revolving credit reserve , either in small installments (with interest). Depending on the contract established with the bank issuing the card, the user can change repayment mode at will, when he wants. They can also finance a major purchase in 3 or 4 times without fees or reduced fees (option often offered by store cards). They are very generally free or very cheap.

They can be of different types:

• withdrawal card limited to the withdrawal of cash from ATMs, either internal to the bank network that issued it, or interbank;
• bank card (for example, Europay Mastercard Visa ) of conventional type, with systematic or not authorization, or even high-end (Visa Premier, MasterCard Gold, MasterCard Platinum). At identical card level, their payment and / or withdrawal caps are sometimes higher than those of their debit counterparts (usually equal to the reserve available for payments, € 500 or more per week for withdrawals, within the limit available reserve);
• commercial sign payment card: usable in the chain of stores (and partner stores) by which it was issued, for example the Carrefour Pass card, Fnac card . The operations are nevertheless managed by a bank. They can sometimes be used to make withdrawals in certain distributors ;
• non-bank payment card, Aurore, Cofinoga, Amex, etc. Sometimes comarqué of the sign where it was issued. It can be used by all merchants and ATMs in the network to which the card belongs.

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Deferred debit card in France

Deferred debit cards make it possible to pay monthly purchases (usually excluding cash withdrawals, debited immediately) ⁶ . They may be subject to a systematic authorization policy

Bank supervision is done randomly if the maximum allowed is not exceeded. If the maximum allowed is exceeded, the transaction is rejected.

The bearer’s account is debited periodically on a fixed or even mobile date as the last working day of the month. No check of the balance is carried out, even in case of authorization, which serves in this case, simply to check that the card “is in order” (oppositions and ceilings). This type of operation provides some flexibility for the purposes of difficult months, pre-authorizations (hotels, car rental, petrol stations …) are also facilitated to the extent that they can be performed regardless of the balance on the account. The risk of overdraft then becomes greater than with immediate debit.

Debit management is however not a property of the carrier as such: it is one of the terms of the contract between the bearer and the issuing body. However, in the context of the entry into force of the European regulation, deferred debit passes into the category credit card, it will be affixed the word “CREDIT” on the new CB produced from June 9, 2016. It is possible, in agreement with the card issuer, switch from immediate debit to deferred debit and vice versa, by issuing a new card showing the card category.

Electronic purse

Electronic purses are similar to a calling card and are reserved for small expenses.

Different systems exist depending on the country:

• Cash in Switzerland and Liechtenstein (discontinued since 31 December 2013);
• Chipknip in the Netherlands (discontinued 31 December 2014);
• Geldkarte in Germany;
• Moneo in France (abandoned on July 28, 2015);
• Proton in Belgium (discontinued on 31 December 2014) ⁷ ;
• Minicash in Luxembourg (discontinued on 31 October 2011);
• Octopus in Hong Kong ;
• Nextwave Titanium + with Visa or Mastercard in Canada .

The card can possibly be reduced to a simple contactless electronic chip integrated in the mobile phone . Already deployed in Japan , this system is currently being deployed intensively in France.

Other cards

There are other types of cards:

• business card: for the management of the expenses of the employees of a company;
• card purchase: for the purchase of supplies of the company;
• loyalty card ( Loyalty );
• associative map ( Affinity );
• city ​​map;
• virtual card ( blue e-card or e-commerce ).

Dimension of the cards

The size of payment cards is defined by ISO 7810 (ID-1 format): 85.60 × 53.98 mm . It is derived from the measurement in inches 3 ³ / ₈ × 2 ¹ / ₈ in.

The thickness of the map is variable, depending in particular that the text of the back is embossed or not.

Identification

Information

A credit card is identified by the following information:

1. One number ( 16 digits for Visa, Visa Electron, VPay, Mastercard and Maestro, 15 digits for American Express).
2. The end date of validity (sometimes with the start date).
3. The name of the cardholder, sometimes accompanied by the name of the issuing bank and the address of the agency . Sometimes only the name of the issuing agency is included (in the case of certain debit or prepaid cards), in which case it is up to the merchant to verify the identity of the cardholder by comparing the signatures on the back of the card on the bill (if the signature of this is required) and on the identity document presented.
4. The visual cryptogram consisting of the last 3 digits printed without embossing on the back of the card (or 4 digits on the front for American Express cards).

Bank card number

The credit card number is according to the international standard ISO / IEC 7812:

1. 6 digits for the Issuer Identification Number (IIN, formerly Bank Identification Number , BIN), the first of which is the Major Industry Identifier (MII), between 4 and 6  digits for banks.
2. A variable number of digits identifying the card within the bank, between 9 and 12  digits .
3. 1 checksum figure calculated according to Luhn’s formula .

For the most common cards, the card number has 16 digits arranged in 4 groups of 4 digits .

Support Management

The cards are manufactured by inserters, for example Oberthur Technologies , Morpho , Gemalto or ASK .

As a rule, the card is made for the issuer who will give it to his client. When the card is associated with a secret code , the latter is communicated to the cardholder either by the manufacturer or the bank, but always by separate mail to ensure better security.

Privacy and Personal Data

Principles

The use of payment cards exposes the user to the traceability of his purchases, which can be used for commercial or judicial purposes.

Tracking is facilitated by the establishment of cards equipped for contactless payment that allow the interrogation by nearby terminals ( 10 cm ) that can be portable, without the cardholder is aware. The Passenger Name Record(PNR) provided during transport (including air) usually include data on payment cards ⁸ .

In 2011, to respond to a request from a clientele wishing not to include all their transactions on their usual bank statements and in the context of the opening to competition on the issuance of payment cards, the Services Directive payment authorized the use of prepaid bank cards issued by non-bank companies. The prepaid bank card allows a relative anonymity according to the selected issuer ⁹ .

Loss or theft

The user must quickly alert his bank when a potential loss or theft of his credit card. There are many phone numbers to reach a service dedicated to the loss and theft of credit cards. These phone numbers change depending on your location ¹⁰ .

Economic weight

Estimate

For 2005, it is estimated that traders in the European Union paid more than 25 billion euros in fees for the use of payment cards, for a total turnover of 1350 points of sale. billion euros ¹¹ . Payment cards would contribute up to 25% to the profits of the retail banking sector. 64 billion credit card transactions were processed in 2008, an increase of 35% compared to 2007 ¹² .

Competitive Issues

If the economic sector of payment cards is at the center of the curiosity of several competition or regulatory authorities in various countries, it is not by chance. It is a network industry based on double-sided markets; two of its protagonists – Visa and MasterCard – are bank associations, themselves the result of joint ventures , which distribute the cards to cardholders and offer services to merchants who accept these cards.

These peculiarities suggest that the sector may not be sufficiently competitive and call for the intervention of competition or regulatory authorities . However, these same characteristics make it difficult to determine the competitive balance sheet by reference to the usual standards of competition law . The economic analysis required for competition law or regulatory decisions is hitting these economic models that are presented as innovative.

Management fees

France

One aspect of this competitive environment is the charging of transaction-based management fees that encourage merchants to set minimum thresholds for card payment. If some major chains accept the credit card from the first cent, other businesses regularly claim a minimum payment of 10 to 15 euros .

Legal aspects

France

• A signature is obligatory in the event of payment by card superior to 1 500 euros ¹³ .
• The card payment ceiling is determined on a contractual basis between the bank and its client ¹³ . It may, under certain conditions be modified, upward or downward, temporarily or permanently.
• A minimum amount may be requested to accept the credit card ¹³ . In this case, the minimum amount must be made known to the customer by posting (or on the card if it is a restaurant or bar).
• The merchant may require the presentation of an identity card if he mentions it in his general conditions of sale made known to the customer by posting ¹³ .
• The merchant may refuse bank cards without chips, if he brings it to the attention of the customer by posting.
• The merchant is required to accept bank cards bearing the same logotypes as those made known to the customer by posting.
• The merchant can (and even if he wants to avoid the loss of the guarantee of payment) refuse the credit card in case of malfunction of his terminal. However, it is recommended in this case to affix a poster type “terminal CB down”.

Chronology

Birth of the payment card

• 1914: Western Union metal payment card .
• 1950: Charga-Plate payment card
• 1950: Diners’ Club credit card in the form of a small notebook.
• 1951: Frankin National Bank card payment card.
• 1953: debit card.
• 1957: BankAmericard payment card (future Visa).
• 1958: American Express plastic payment card.
• 1960: embossed payment card.
• 1964: Eurocard payment card in Sweden.
• 1967: credit card Carte bleue in France.
• 1960s: Cetelem private payment card , Sofinco , Cofinoga .
• 1971: magnetic stripe payment card.
• 1974: payment card with memory.
• 1978: payment card with Bull processor

The era of the chip

• 1979: payphones in France.
• 1982: smart phone card.
• 1989: crypto processor card.
• 1994: electronic purse.
• 1997: contactless card.
• 2001: virtual phone card.
• 2002: blue e-card.
• 2004: contactless payment card.

Birth of large networks

• 1965: ATMs by Générale de Banque (future BNP Paribas Fortis ) in Belgium.
• 1967: Interbank (future MasterCard).
• 1967: Charge Master (future MasterCard).
• 1967: bank cards (guarantee of checks).
• 1967: ATMs in Japan.
• 1968: Eurocheque.
• 1968: Interbank and Charge Master agreements that will become MasterCard.
• 1971: Groupe Carte Bleue (absorbed by Visa Europe in 2010) bringing together 6 French banks (BNP, CCF, Crédit du Nord, CIC, Crédit Lyonnais and Société Générale) around the Carte bleue payment card.
• 1977: Visa.
• 1978: cobranded cards.
• 1978: Visa Europe in London.
• 1979: MasterCard.
• 1980: generalization of the magnetic track.
• 1984: Cartes Bancaires group bringing together French banks linked to Visa or MasterCard around the interbanking of payment cards.

Internationalization

• 1974: Agreements Carte bleue Americard: the international Blue Card.
• 1977: Crédit Agricole distributes Eurocard .
• 1978: Crédit Agricole buys Eurocard .
• 1979: electronic payment terminals in France and online electronic wallet by the Regional Bank of Ain ¹⁴ .
• 1983: AFB .
• 1984: Cartes Bancaires group bringing together French banks linked to Visa or MasterCard around the interbanking of payment cards.
• 1985: prestige Amex Gold payment cards (which existed since 1966 in the United States where the Platinum card was introduced in 1984), Visa Premier, MasterCard Gold and MasterCard Platinum.
• 1998: international payment card with systematic authorization, devoid of embossed Maestro and Visa Electron numbers.

Interbanking

• 1984: Interac in Canada.
• 1985: interbanking.
• 1985: Cartes Bancaires chooses the chip.
• 1986: prestige payment cards in France.
• 1986: Cetelem issues bank cards.
• 1986: credit cards Carte Bleue.
• 1988: revolving credit in banks (Pluriel, Credilion …).
• 1989: Cofinoga creates Sigma Bank.
• 1989: UAP credit card.
• 1990: first withdrawal in the Cartes Bancaires network.
• 1992: smart payment cards.
• 1994: loyalty and payment card: Point Ciel de Cofinoga.
• 2003: GIM-UEMOA: federating all the banks and financial institutions (more than a hundred) of the eight countries of the West African Economic and Monetary Union (Benin, Burkina Faso, Ivory Coast, Guinea-Bissau, Mali, Niger, Senegal and Togo).

The era of change

• 1994: Central Interbank Settlements for large transfers between banks.
• 1995: chip readers in ATMs.
• 1996: Europay (absorbed by MasterCard in 2002), MasterCard and Visa launch EMV .
• 1998: ticketing experiments in France.
• 1998: experiments of the electronic purse in France.
• 2000: payment on the Internet .
• 1998: evolution of electronic payment terminals for the transition to CB 5.1 .
• 1999: evolution of electronic payment terminals for the year 2000 transition.
• 1999: European Central Bank .
• 2000: payment encryption on the Internet.
• 2001: evolution of electronic payment terminals for the changeover to the euro .
• 2002: payment authentication on the Internet.
• 2003: deployment of EMV in Europe.
• 2004: deployment of EMV in France.

Dematerialization

• virtual credit card e-credit card .
• virtual gift card e-gift.
• virtual fuel card e-DAC.
• virtual phone cards e-voucher and e-topup.