Opening the door for banks to offer non-branded PIN debit cards and even mobile wallets, the Debit Network Alliance is developing its own application identifier for routing transactions from EMV-chip cards.
The alliance, a company owned by 10 major PIN debit networks, is moving forward with its own application identifier, or AID, to establish a non-branded debit card for issuers. This technology would add to the routing options provided to merchants through the Durbin amendment.
Currently, debit issuers that offer EMV cards use a common AID plus an AID provided by the network whose brand is on the card. The DNA's plan would provide an alternative that doesn't conform to any restrictions the card networks established in their own technology.
"Financial institutions can leverage the non-branded card and still be part of the new technology in the market," said Terry Dooley, chief information officer for the Shazam network, an alliance member.
The new AID still has to comply with Durbin amendment mandates that call for merchants to have at least two unaffiliated debit networks to choose from for transaction routing. But it doesn't have to pair up with a major card brand and operate by the brand's rules and fees.
The new AID, along with its specifications for point of sale hardware, is in the process of getting global certification to comply with EMVCo standards, Dooley said. EMVCo is the EMV technical body collectively owned by American Express, Discover, JCB, MasterCard, UnionPay and Visa.
When in place, the new AID will allow a financial institution to do more than maintain its own ATM card or non-branded POS card programs, Dooley said. "It has several other uses, like prepaid or closed-loop solutions, to name just a couple," Dooley added.
Among those possibilities would be a bank linking a non-branded debit card to its own mobile wallet and operating without major card restrictions or fees, said Richard Crone, chief executive of San Carlos, Calif.-based payments consulting firm Crone Consulting LLC. However, a bank could still have the option to offer all cards or bank accounts through that wallet, he added.
"This has been a big issue, and certainly the proprietary PIN debit networks want transactions to be independently routed without any restrictions," Crone said. "But the Debit Network Alliance vision is not just for EMV; the end game is likely mobile."
If a bank has access to a multi-factor authentication mobile wallet as well as a network that uses the DNA's new application identifier, it has the capability "to go straight to the core of payments without going through Visa or MasterCard," Crone said. Under that scenario, a whole new set of clearing opportunities emerges, he added.
Others are more skeptical of the link between the DNA's technology and mobile wallets.
"It [mobile] could be where all of this may lead to, but the DNA technology is strictly associated to what the card can do right now," said Randy Vanderhoof, president of the EMV Migration Forum.
The fact that the alliance is just now delivering its own AID "shows how difficult it is to actually develop, test and get everyone to agree and get something like this into market," Vanderhoof said.
The DNA was formed in late 2013 out of frustration with the major brands over how to establish and govern a common AID for routing EMV debit transactions in compliance with the Durbin amendment. Its members have been seeking a solution independent of the global brands.
"It's just a matter of the DNA's approach and solution catching up to the rest of the market that is already in place," Vanderhoof added. "A lot of cards are being branded with the common AID because that was the only option available up until now."
The DNA has been steadfast in its position that equal access to EMV chip technology should include support of competition, network choice, innovation and delivery of value to network participants.
While the alternative networks cringe at the card brands' rules and governance of technology, they sometimes forget that debit as a payment method didn't resonate with consumers and merchants until the major brands got involved, said Brian Riley, senior research director and analyst with Boston-based CEB TowerGroup.
The major card brands have been "the guard rails that have kept the industry in shape for half a century," Riley said. "It is easy to say there are too many rules and the pricing is off, but this is something that works and gets tested every day to the tune of $8 trillion a year."
Ultimately, the new AID "is about competitive positioning for the debit networks," said Julie Conroy, research director and fraud expert with Boston-based Aite Group.
"I don't see this move changing the conversation much, given that the existing common AID workaround is working for financial institutions I've spoken with," Conroy added.
Not all debit networks support the DNA or the new AID, Conroy said. "It's understandable that Visa [Interlink] and MasterCard [Maestro] debit brands wouldn't be in there, but it's interesting that other networks have opted not to join."
The Debit Network Alliance lists AFFN, ATH, NETS, NYCE, Co-op Financial Services, Jeanie, Shazam, Presto, Pulse and Star networks as its owners/members.
Some prominent networks not listed include Accel and Cirrus as well as technology provider Cardinal Commerce.