Visa and MasterCard may differ on their support of chip-and-PIN in the U.S., but they are of one mind in their approach to Australia.
Visa Australia and MasterCard have filed a joint application with the Australian Competition and Consumer Commission asking that 90% of in-store credit card sales be verified through PINs by the end of this year. The card brands want to see signature transactions completely banned in Australia by June 30, 2014.
The push in some ways echoes MasterCard's stance but not Visa's in the U.S. regarding the importance of using a PIN with EMV-chip cards. Visa favors chip-and-signature payments in the U.S. to allow for a faster and more straightforward implementation. MasterCard favors PIN, but does not explicitly require it.
"It begs the question of why the networks do not feel it necessary to mandate PINs in the U.S. when they do elsewhere," says Mark Horwedel, CEO of the Merchant Advisory Group, which staunchly supports the chip-and-PIN model for the U.S.
MasterCard sought feedback from banks and retailers in Australia before taking the position that PIN should be mandatory, says MasterCard spokesman Seth Eisen.
MasterCard has also encouraged the use of PIN in the U.S. by establishing a hierarchy of fraud liability that provides more benefits to issuers and merchants that adopt PIN security.
"MasterCard works closely and proactively with customer financial institutions, the industry and the public to continually enhance the payments system to protect consumers and merchants," Eisen says.
With PIN security, Visa takes into account that the Australian market is far ahead of the U.S. in EMV and PIN adoption, the card brand says in a prepared e-mail statement.
Australian acquirers and processors have a legacy infrastructure of supporting online PIN verification, even on credit transactions, limiting the investments necessary to migrate to PIN for all domestic transactions, Visa says. Acquirers, not merchants, are responsible for hardware changes in Australia, making it easier for merchants to upgrade terminals to accept PIN, Visa adds.
Consumers would still be able to make contactless payments of up to $100 without a PIN, Visa says. One in four Visa transactions are contactless, it says.
Visa has wanted to eliminate signature transactions since November of 2009, when the card brand announced a plan to wipe out signature payments in Australia by April of 2013. Banks didn't follow Visa's 2009 request because consumers were using signatures for transactions on so many other cards.
The brands' recent application to the regulator claims that merchant acceptance practices for signature transactions "have become increasingly lax," The Sydney Morning Herald reports. The card networks complained that in practice, many consumers return their cards to their wallets before their signatures can be verified.
Australia began its migration to EMV-chip cards more than a decade ago. Because fraud has declined as EMV chip-and-PIN cards spread, the card brands' request for PIN speaks directly to the fading effectiveness of signature, says Brian Riley, senior research director and analyst with Boston-based CEB TowerGroup.
"Most people don't sign their credit cards anymore and many clerks don't check the signatures either," Riley says.
PIN is definitely the more secure of standards, and the actions taking place in Australia just add to the confusion the U.S. payments industry is currently experiencing, Riley says.
"There is complete disparity between the two positions, with MasterCard supporting PIN and Visa saying it would prefer signature," in the U.S., Riley says. "I am not a proponent of the EMV card, but if the purpose of converting to EMV is for the security, then you really need a PIN with it."
Signature transactions actually mislead the cardholder into thinking they are somehow helping protect their purchases against fraud when they sign their name at the POS, the Merchant Advisory Group's Horwedel says. The argument that consumers won't want to enter PIN numbers at the point of sale also does not hold water, considering they have been doing it at ATMs for decades, Horwedel says.