What Is A Keyed-In Transaction?
A manual credit card transaction, where account information is keyed-in by hand, is known as a “keyed transaction”. This process is utilized when a card cannot be swiped or read via its chip for any reason.
Keyed-in transactions ensure payments can still be processed even without a physical card present. The cardholder provides their account number, expiration date, CVV, and often the billing address associated with the card to complete the transaction.
While slightly less secure than other payment methods, keyed-in transactions serve an important purpose in allowing flexibility and continued commerce. When performed legitimately with valid account info, keyed-in payments carry the same guarantees and fraud protections as any other credit card charge. However, they do introduce a slightly higher risk of unauthorized use or fraud due to the manual entry of sensitive account details.
Keyed-In Transaction Explained
Fraudulent charges and higher fees are two major downsides of keyed credit card transactions, where a card’s information must be manually entered instead of scanned or chipped.
Keyed-in transactions are considered less secure than card-present payments because sensitive account details are exposed, increasing the risk of unauthorized use. Furthermore, since the card itself is not read, merchants cannot verify if it is legitimate or counterfeit. As a result, keyed payments carry greater liability if fraud occurs, and they also typically incur higher interchange rates from processors.
While keyed-in transactions serve an important purpose in enabling flexibility and continued commerce, they should be minimized when possible. If a customer’s card can be swiped or chipped, that is generally the preferred method. Only keyed entries should be used when a card is physically damaged, expired, or otherwise unreadable by the payment terminal.
Even for card-not-present payments like eCommerce or mail/phone orders, obtaining a signed authorization form provides some additional fraud protection, though it does not eliminate the risks entirely. Regularly monitoring statements for any suspicious charges after keyed payments is also advisable for cardholders.
For merchants, reducing keyed-in transactions leads to lower costs and less exposure to fraud-related claims or chargebacks. Well-maintained payment terminals help ensure higher read rates for physical cards and can lower keyed entry needs. Staying up-to-date on the latest acceptance policies also helps avoid inadvertently declining legitimate card types.
While keyed payments will likely always comprise a small portion of transactions, both merchants and cardholders benefit when that portion remains as small as reasonably possible. By leveraging technology like chip cards and contactless payments, the industry continues moving closer to a frictionless, fully secured payment experience. But for the foreseeable future, keyed entries will inevitably still occur, and all parties must take appropriate precautions.
Keyed-In Transaction Examples
Keyed credit card transactions, where information must be manually entered instead of read from a card, present additional costs, risks, and responsibilities for merchants and cardholders.
For merchants, keyed payments typically incur higher processing fees due to their greater fraud liability and dispute potential. If a customer contests a keyed charge as fraudulent, the merchant usually bears responsibility for that transaction amount. Chip or swiped payments, on the other hand, typically shift liability to the issuer if fraud occurs.
Higher fees and liabilities are not the only downsides of keyed entries for merchants. They also require more time and effort, introducing inefficiencies. Some merchants may also find that customers perceive keyed payments as less secure, preferring chip or contactless alternatives when available.
For cardholders, keyed-in transactions heighten exposure to unauthorized charges and account takeover. Since a physical card is not verified, thieves can more easily make fraudulent purchases or create counterfeits using stolen information. Close review of statements is especially important following any keyed payments to quickly detect suspicious activity.
While chip cards and other EMV technologies have strengthened security for most payments, keyed entries continue serving an important function – at least for now. They ensure continued access and commerce when a reliable card reader cannot authenticate a card. But they should be a last resort, only used when truly necessary due to a card issue or lack of more secure payment methods.
When keyed entries cannot be avoided, all parties share a common interest in mitigation strategies. This includes educating customers on fraud alertness, encouraging signed authorization forms when possible, properly maintaining terminals to maximize read rates, and staying up-to-date with policies for accepting newer card technologies.
With time, as EMV adoption increases and contactless payments grow more ubiquitous, the need for keyed-in transactions will likely diminish. But for the present, awareness of their risks and costs helps drive responsible use and alternate solutions whenever feasible. By implementing prudent safeguards, merchants and customers can together minimize harm from what remains an outdated and insecure payment method.
Keyed-in transactions and credit card fees
Keyed credit card transactions, where information must be manually entered, introduce greater risk and cost for all parties involved in the payment process. Processing companies, merchants, and cardholders each have a stake in mitigating these impacts when possible.
For processors, keyed payments represent higher fraud liability and thus warrant higher fees to offset risk. Even with fraud monitoring and chargebacks, there is no guarantee against loss from unauthorized charges or account takeover when a physical card is not verified. These higher fees and risks get passed on to merchants and ultimately consumers in the form of higher prices or service costs.
Merchants cope with higher fees, expenses, and some fraud liability for keyed transactions. They may see fewer customers willing to use this less secure payment method, perceive it as damaging their brand, or suffer direct losses if fraud occurs. Some merchants also find that keyed entries require more time and resources, reducing profit margins.
As the issuer of the payment card, a bank’s fraud liability depends on the transaction details. Keyed entries typically shift more responsibility to the merchant, but the bank still faces reputational damage and potential lawsuits if customers experience unauthorized charges. They also pay higher wholesale fees to processors for these riskier transactions.
For cardholders, keyed payments mean greater exposure to fraud, account takeover, and identity theft with little to no recourse. While liability for unauthorized charges is often limited, the time and effort required to dispute fraudulent charges, freeze accounts, and monitor statements still creates hassle, stress, and loss of productivity. And in some cases, cardholders may face temporary account suspension during an investigation.
Why are keyed transactions considered risky?
Keyed credit card transactions, where information must be manually entered, introduce substantial financial and reputational risk for all parties involved. This includes higher processing fees, fraud liability, dispute costs, and damage to brand trust.
For payment processors, keyed entries appear inherently fraudulent since a physical card is not verified. This means they cannot guarantee the charge is legitimate, exposing the processor to losses from unauthorized use, account takeover, or outright theft. To offset this risk, processors charge merchants significantly higher fees for keyed payments. These extra costs then get passed on to consumers in the form of higher prices or service fees.
Merchants bear the bulk of fraud liability and related expenses for keyed transactions. This includes not only the higher fees charged by processors but also potential losses if a keyed charge is indeed fraudulent. Legitimate disputes, chargebacks, lawsuits, and damage to customer trust hurt merchants’ bottom lines and businesses overall. Keyed entries may also require more time and resources, reducing profit margins.
As the issuer of the payment card, a bank still incurs costs from higher processor fees, wholesale rates, and potential fraud claims on behalf of its cardholders. Their exposure depends on the details of the transaction but includes reputational harm, legal threats, and having to potentially issue new cards/numbers if an account takeover occurs. Banks may also see a decline in merchant partnerships due to the perceived risks of accepting keyed payments.
For cardholders, every keyed transaction means elevated exposure to fraud, identity theft, and account compromise with little recourse if it happens. While fraud liability is often limited by law, the personal hassle, time lost disputing charges, credit monitoring fees, and the possibility of account suspension still create substantial hardship, distress, and out-of-pocket costs.
How to reduce the risks of a keyed transaction?
While keyed credit card transactions typically introduce substantially more risk and cost, they still serve an important function in enabling continued commerce when more secure methods cannot be used. However, when keyed entries cannot be reasonably avoided, all parties share an interest in mitigation strategies to curb negative impacts.
For merchants, settling terminals promptly, often within 24-48 hours, helps minimize fraud liability and processing fees for keyed payments. Most card networks charge higher rates for batched transactions, so frequent settlement reduces exposure. It also provides more opportunity for transaction monitoring and dispute prevention.
Investing in mobile card readers eliminates the need for manual entries and associated risks/costs when possible. By allowing on-site card verification even without a stationary terminal, fraud is less likely and fees stay lower. Cardholders also perceive greater security, preserving trust in the brand.
For all merchants accepting payments, educating staff on procedural safeguards, alternative solutions, and fraud indicators helps curb unnecessary keyed entries. This includes options like mobile readers, customer education, signature capture, and real-time authorization when feasible. Regular evaluation of new technologies also ensures the ability to replace keyed payments altogether when viable.
Processing companies and card issuers benefit from any strategies that lower risk, cost, and liability for their merchant partners and cardholders. Widespread adoption of best practices for minimizing keyed transactions helps assure continued growth and good standing in an increasingly digital and secure payment market. It also builds goodwill by improving the overall user experience across all payment channels.
Cardholders themselves can take some precautions, though liability for unauthorized charges following a keyed entry is typically limited by law. Close review of statements, prompt dispute reporting, and fraud monitoring/freezes help mitigate damages from any compromised accounts or theft. Patients also provide merchants valuable feedback on replacement solutions, new technologies, and staff/process improvements that better ensure a secure payment experience.
