As the U.S. continues its conversion to EMV chip-card technology, the Durbin amendment's requirement for supporting multiple debit networks is presenting yet another challenge to overcome.
The Electronic Transactions Association this week called for a single U.S. debit application identifier, or AID, as a way for debit networks to make a smoother transition to EMV in the coming months. Most other countries have one debit network and, thus, no federal regulations establishing a choice of networks, says Mary Bennett, director of government and industry relations for Washington, D.C.-based ETA.
"EMV in the U.S. is turning out to be very different from the rest of the world because we have 18 debit networks and the Durbin amendment," she says.
The application identifier essentially operates as a piece of data code, rather than a separate application, that all key players in the industry would use in establishing how EMV debit transactions would be routed on payment networks.
Currently, information about which network the merchant is going to use and how to route it for a transaction is held at the processor level, Bennett adds. "But when we get to EMV, the card will have a chip that cannot accommodate 18 different network protocols," she says.
The ETA and other payments organizations have been trying to wrap their arms around the technology challenges facing U.S. acquirers, processors and merchants in light of the April 1, 2013 deadline that card networks have imposed for acquirers and processors to be able to handle EMV transactions.
Merchant acquirers represent the "tip of the spear" because they will be the first required to meet EMV standards in the face of liability shifts, Bennett says.
A day after the ETA announced its push for a common technology, MasterCard Inc. announced Jan. 18 it would ease the EMV migration by making the company's proprietary technology available so acquirers could use the Maestro AID for U.S. debit networks.
"At first blush, it's not the same," Bennett says about MasterCard's plan for easing EMV technology concerns.
Bennett says she would have to study the MasterCard proposal and discuss it with other ETA members to draw a better conclusion, but "absent knowing what Visa's decision on this will be, the MasterCard announcement is not a 100% solution."
Essentially, the ETA is seeking a universal solution, whereas MasterCard solves the application identifier concerns for transactions originating from Maestro.
Yet, MasterCard says, by sharing its technology the card brand supports the spirit of what ETA is seeking.
"This announcement reflects conversations that we've had with issuers, merchants, acquirers and other groups, including the other debit networks in the U.S. and the EMV Migration Forum, of which the ETA is a member," Carolyn Balfany, MasterCard's group head for U.S. markets product delivery, stated via e-mail.
"We have actively supported the collaboration around the definition for a common U.S. debit solution with many others across the industry," Balfany says.
MasterCard's action today opens the card brand's technology to allow the market to move forward with EMV with the parameters mutually defined and available in the market today, she adds.
A single debit application identifier code, on which separate applications could be attached, would address the routing problem by establishing a method for EMV transaction data to be accepted at a merchant terminal, sent to a processor, and then processed through a list of bank identification numbers to determine which networks the issuer belongs to and which one the merchant prefers.
Unless the industry resolves this technology issue, a merchant could choose a network that neither the consumer card nor his own terminal would support, Bennett says.
Any industry decision on technology has to solve the network dilemma as well as meet industry standards and federal requirements, she says.
"The application identifier touches everything, and all parties have to agree on it," Bennett says. "Otherwise, it could become a logistical nightmare beyond comprehension."
Mark Horwedel, CEO of the Merchant Advisory Group, says his organization supports the ETA stance with a wary eye toward the April deadline for EMV acceptance.
"This is a big subject and we are heavily invested in the outcome," Horwedel says.
The merchant community is concerned that EMV will diminish the competitive balance between the owners of EMV and the PIN debit networks, Horwedel adds.
In addition, the merchants' group feels the deadlines are far too aggressive given the fact that the industry has not yet identified a solution to the problem, Horwedel says.
As for MasterCard's announcement, Horwedel says, "It is certainly a step, but I've learned to wait for the details behind these releases before I draw any conclusions."