You may have noticed in more recent times that your POS terminal does not even need to ask your customer if they are using a debit or credit card. Newer terminals make the dipping process even faster and are becoming smarter but yet some terminals still ask the users what kind of card this is using. It is not magic but instead is technology that has been incorporated into EMV chips called Application Identifiers (AID).
These are small bits of information that are encoded on the chip and tell the POS terminal what kind of card is being used. This is a relatively new innovation and potentially cuts out any mistakes in payment processing when it comes to the interchange fee. It also speeds up the checkout process dramatically since less human interaction is required.
Each kind of card has its own unique sequence. A MasterCard debit card has a different sequence than a American Express credit card does and each company has several different variations. There are thousands of different combinations and these cover the world, of course the world is far ahead of the US when it comes to credit card technology. For a list check out this page.
The Application Identifier also helps when it comes to processing. It determines the transaction routing and a merchant can set this up with their processor. Since most debit cards have two different Application Identifiers this is extremely important and should be discussed with your processor. This flexibility can greatly benefit the bottom line as many younger buyers prefer using a debit card to a credit card to avoid racking up credit card debt.
Part of the reason that POS terminals in the US still ask the cardholder if they are using a debit or credit card is simply that this is newer technology here. EMV debit cards only become more prevalent than credit cards last year and because of this the POS terminals were also slower to be adapted and upgraded and may have retained older versions of the software. Over time this will be eliminated completely and in the end it will probably be a moot issue as PIN verification will become standard and that will eventually be replaced by biometrics. Until then, you may still have to tell the terminal what kind of card you are using.
