The U.S. transition to EMV chip cards continues to receive backlash from the merchant community, which considers the move as creating unnecessary and challenging technical and expense scenarios.
From ISO&Agent Weekly:
“Eventually, this technology will be broken [by fraudsters], and you have to ask if there is any value in going into a process like this,” John Gapinski, president of Secured Retail Networks said at the recent RAMP conference. “If I was a merchant, I wouldn’t do it.”
At the same conference, Dee O’Malley, senior director of payment acceptance for Best Buy Co. Inc., said numerous problems plague the switch to EMV in the U.S., including some issuers that may not require use of a PIN with EMV cards as added security.
From the beginning, few expected a smooth transition as an entire large country converted from magnetic-stripe technology to the EMV (Europay, MasterCard and Visa) chip standard common in most countries.
For one thing, debate is continuing here over a common code, or application identifier, for routing debit transactions and providing merchants a choice of networks as mandated by the Durbin amendment to the Dodd-Frank Wall Street Reform and Consumer Protection Act.
“The common debit code is taking up so much bandwidth and attention that many in the industry are not looking past that to ask what’s next with EMV migration,” says Randy Vanderhoof, executive director of the Princeton Junction, N.J.-based SmartCard Alliance.
Some of the merchant backlash may stem from ignorance of what EMV provides, including enhanced security at the point of sale and global acceptance, but much of the blame for the continued concerns coming from the merchant community can be traced to issuers wanting to go the less secure and less expensive chip-and-signature route. Moreover, Visa and MasterCard would prefer to have their own debit AIDs on issuers’ chips instead of go along with the D-Payment Application Specification (D-PAS) solution from Discover that 10 debit networks have aligned to support. This lack of continuity and consistency will only increase the cost of and confusion over the EMV conversion while opening up opportunities for potential new solutions to emerge, and many merchants seem willing to wait that out, despite the liability risk they face in doing so. The bankcard brands might extend the deadlines, but they might hold off for fear their efforts could be circumvented by an alternative solution.
Some insiders believe the Merchant Customer Exchange (MCX), which various major retailers that include Walmart and Target formed to create a common mobile app for all participants to reduce payment acceptance costs and to keep transaction data in merchants’ hands, was just a ploy to leverage lower interchange rates. An actual product has yet to emerge, and details of its formation have been sketchy at best. But if the EMV pressures keep up, what might have started as a leverage tool could become a real payment option, perhaps better than EMV, at least domestically. It also could disintermediate traditional card brands and issuers altogether. As such, it would be in the best interests of the card brands and issuers to create more consistency in their transition strategies and do more to help merchants and the acquiring community understand EMV’s advantages, while keeping their own goals more in line with those benefits. With more payment activity occurring online, the payments industry also needs to do more to address card-not-present fraud, which EMV does not address, at least not beyond various product tests that have yet to roll out on a broad scale.
