Personal Identification Number (PIN)

A Personal Identification Number (PIN) is a numeric code employed in electronic financial transactions, typically linked to payment cards and serves as a vital security measure in the electronic transaction process.

This numeric code is associated mainly with debit cards, essential for activities like bank withdrawals. Still, it also finds use in various other areas, such as home security and mobile phones.

To enhance security, selecting a longer, less predictable PIN unrelated to personal information like birthdays or Social Security Numbers is advisable. This precautionary measure is crucial in safeguarding against fraudulent activities during merchant transactions.

Electronic transactions with merchants are more intricate than standard ATM transactions, involving several parties: the merchant, the merchant acquiring bank, the processing network, and the issuing bank. Utilizing a PIN number enhances transaction security by adding an extra layer of buyer identification.

Typically, a PIN is needed as the final step in payment, granting the merchant authorization to process the card payment. This requirement usually applies at the point of sale rather than for online purchases. Once approved, the information is relayed to the merchant acquiring bank, which handles payment settlement.

Subsequently, the processing network transmits the payment details to the cardholder’s issuing bank, where further security checks are performed to prevent fraud and verify the availability of funds in the cardholder’s account.

The issuing bank takes stringent security measures when receiving transaction data from the merchant, prioritizing transaction safety. Upon confirmation by the issuing bank, the information flows through the processor to the merchant acquiring bank, which notifies the merchant and initiates the transaction settlement process.