You may think you have seen this headline before; “Walmart Sues Visa”, but this is actually new. Walmart filed a lawsuit in a New York Court accusing Visa of forcing it to accept signature as the Customer Verification Method (CVM) for debit cards, particularly those with an EMV chip. As reported in Bloomberg:
In the latest salvo in a long-running feud over the costs of processing payments, Wal-Mart Stores Inc. sued Visa Inc.’s U.S. unit on Tuesday, saying the company wants the retailer to use a less-secure method for verifying debit cards in order to route transactions through its own networks to boost profits.
Wal-Mart filed a heavily redacted complaint in New York state court, arguing that Visa U.S.A. is pushing the retailer to verify debit transactions with customer signatures, rather than the chip-and-pin method. The world’s largest retail chain said in its complaint that the chip-and-pin payment protocol at the checkout counter is more secure and would allow it to route transactions across less-expensive networks.
This is curious. Debit cards have PINs. The PINs can be required for debit transactions through the Visa or Interlink networks or Walmart can choose an EFT Debit network on the U.S. Common Debit AID. All issuers are required by regulation to have an alternative network that the merchant can choose. Other large merchants like Kroger have been requiring its debit card customers to use PINs. It may not be the customer’s choice, but some merchants are taking a hard stance and will risk losing some customers over their CVM preference.
Not all new EMV terminals are set up out of the box to recognize the U.S. Common Debit AID and the associated EFT Debit networks. Walmart however, has the sophistication and staff to make this happen. But Walmart believes it is trapped in a position to accept only the more expensive signature transactions
“Visa has acknowledged in many other countries that chip-and-pin offer greater security,” said Wal-Mart spokesman Randy Hargrove, in a statement. “Visa nevertheless has demanded that we allow fraud-prone signature verification for debit transactions in our U.S. stores because Visa stands to make more money processing those transactions.”
At the early stage of this argument, it is difficult to predict how this may impact the debit market, or who will win. My bet is that the biggest winners will be the lawyers.
Overview by Sarah Grotta, Director, Debit Advisory Service at Mercator Advisory Group
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