Over the years, people who own a credit card have had this believe / general conception that without their PIN or OTP; money cannot be paid or get deducted from their credit card. This article is written to correct such misleading notion or believe and as well give a detailed explanation about the reality of the credit card payment process which is a very important information to know if you want to keep your money secured.
Can a payment be made from a credit card without PIN or OTP?
The truthful answer to that question is Yes. In reality, there is no need of PIN, OTP or any other type of authentication method to make any payment from any credit card. To know the reason, we need to briefly understand the payments process through the use of credit cards.
For Instance, what happens when you handover your credit card to the seller (Maybe a POS Agent) for the payment of your purchase?
The seller Inserts your credit card to the card reader device and then collects the card detail; (NB: This seller can as well be an online E-commerce like Konga. Etc.) this card details goes to the payment gateway and the payment gateway sends the details further to the card association or payment network (Visa or Master card or any other company depends on your card),further after verification of the card, this information get passed to the bank of the customer (bank which issued the card to the customer) and then bank either approves or declines this transaction and then this approval or rejection goes back to the seller in the reverse direction through the same channel.
From the above explanation, the below four parties are involved for the processing of your credit card for payment
1. Seller (called merchant) who is swiping your card or inserting your card to the card reader device.
2. Payment Gateway.
3. Card association or payment network.
4. Customer bank or credit card issuing bank.
The below picture shows the flow of the transaction.
1. Merchant or Seller
This is the owner of a product or service which a customer will be purchasing and then making a payment for. The merchant can be a restaurant, school portal or an online shopping portal or any other website which accepts credit card for bill payment. The merchant decides which payment gateway to choose.
2. Payment gateway
Payment gateway is responsible to process and authenticate the credit card. When the merchant swipe/inserts the credit card to the card reader machine or device then the card details (16 digits credit card number, expiry date, CVV etc.) along with the merchant ID goes to the payment gateway. Payment gateway identifies the card network (Visa, master card etc.) by reading the credit card number and sends the card details to the card network. At this point, Payment gateway get to know which type of security applied to the credit card. It could be 2D or 3D security.
What is 2D and 3D Security?
2D secured credit card means that only the information that is present on the credit card (16 digits credit card number, expiry date, CVV etc.) will only be required for authentication.
In contrast to 2D, 3D secured credit card means that in addition to the information present on the credit card (16 digits credit card number, expiry date, CVV etc.), more information such as PIN, Password, OTP will be required to authenticate the credit card. Now here is the main point. The card association or payment network keeps the information of what type of security applied to the credit card and exchange this information only with the payment gateway but implementing this security is the responsibility of only the payment gateway and not the bank.
So, when you receive an OTP on your mobile or PIN is asked then this requirement is done by the payment gateway. Since the Payment gateway has to verify that the payment is being made by the credit card owner so it is up to the payment gateway to verify or not to verify. Please note, customer or credit card issuer bank do not send the OTP or ask for any sort of PIN or verify through any other type of authentication method. The credit card issuer bank approves the payment request when it gets the credit card number and expiry date. So therefore, your bank which has issued the credit card to you and who will approve the payment requests, does not require anything other than the credit card number and expiry date and the cvv number as the case may be.
There are thousands of payment gateways running across the world and no common rules and guidelines are set which can assure that credit card real owner is using the card.
However, recently RBI (Reserve bank of India) has instructed all the payment gateways which are working in India to follow the 3D secure guidelines. so, if you are making any payment in India then OTP or PIN (or any other authentication method) must be required for the credit card payment. But in India too, there can be many places where money can be deducted without the PIN or OTP.
3. Card association or payment network
This is the network or association of all the credit or debit card brands active across the world. In addition, they also facilitate the transaction or payment between different banks and merchants. Card network keeps the complete information about the credit or debit card and this information is only exchanged with the payment gateway. For example, if you have a VISA credit card with 3D secure enabled then the VISA knows about it and only exchange this information with the payment gateway.
Once the payment gateway completes the authentication process (Payment gateway can decide to skip the authentication), it sends the details to the card association for further action. Card association then performs its validation activity and sends this payment request to the issuing bank.
4. Customer bank or credit card issuing bank
Card issuing bank only need credit card number, expiry date and maybe cvv to either approve or decline any transaction. Issuing bank performs some basic checks e.g., checking if customer has enough balance, checking if the customer has exceeded the transaction amount, or checking if the customer is paying any sort of dues. If all these checks are ok, customer bank approves the payment transaction.
Once the customer bank approves or declines the payment transaction, this information travels back to the merchant and acquiring bank in the reverse order.
Please not that when the customer bank approves the transaction, they will not transfer the money to the merchant immediately. The settlement of money takes place on the next day. The acquiring bank collects the reference number of all the approved transaction and sends them to the customer bank. The whole settlement process takes almost 2-3 days.
Cases where a payment gateway will not require for an additional Authentication method for any 3D Secured credit card.
I believe at this point; it is now cleared that only the payment gateway is responsible for the request of PIN or OTP and the payment gateway is chosen by the seller or merchant. We also know that the customer or card issuing bank need only the credit card number and expiry date to approve the payment.
In the below cases you may not be asked to enter any sort of PIN or OTP
1. If you had earlier entered your credit card details on any online shopping portal or any other websites and your payment is due or making the current payment then payment gateway can deduct the money without PIN or OTP.
2. If you are making an online payment to an international payment gateway that doesn’t require an additional authentication method, then PIN or OTP will not be required.
The above are the known reasons for skipping the 3D secure authentication by the payment gateway but there may be other reasons or cases as well.
However, to prevent your credit card from unwanted or unauthorized payments, please Take note of the following.
1. Do not select the option "Save your credit card details for fast payments in future" while making any payment to any shopping website. Never do this mistake. Once you select this option, in future, if you or any unauthorize person makes any purchase from that same website then PIN/OTP will not be required.
2. Be extremely careful while doing any payment to foreign website or shopping portals.
3. There are websites which claims to provide you a certain service for free but ask you to enter your credit card details to check your seriousness. They claim that they will never charge any amount. Never submit your credit card details to these websites.
4. Never share to anyone or enter your credit card number to any unverified website with the believe that your credit card number is not so important without the CVV, PIN or OTP. When you do. It is game over!!!
Protect your credit/debit card, and when you misplace it, contact your bank immediately to block it.
In Conclusion
In most cases, Your 16-digit credit card number is itself sufficient enough to make any payment. Even CVV number has no value and not required for making any online payment. This is because, credit card issuing bank gives approval of payment on the basis of a correct credit card number and expiry date only and do not ask/require CVV, PIN, OTP or any other type of authentication method.
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Written by: Destiny Idika
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