Merchants that now accept EMV-chip cards at the point of sale are not happy with the user experience, and First Data sees itself in a position to help.
The Atlanta-based company is updating its Star PIN debit network, introducing a PINless debit option for transactions under $50, a signature debit option for all transactions and advanced fraud scoring that takes advantage of "learning" technology to increase its crime fighting power over time.
First Data's moves are not direct EMV plays—First Data's other moves include developing its Clover Go EMV card reader for mobile devices and collaborating with Underwriters Laboratories to speed certification. But rather, the latest Star moves are designed to save time in a chip card environment that is gaining a reputation for slowing down and confusing the consumer payment process.
The PINless option for small payments is available now, the company has just finished testing its signature option, and the new fraud engine should be available shortly.
For small transactions, removing the PIN requirement shaves a nominal amount of time, but it's time that payment companies can't afford given the larger change in card payments that comes with the EMV migration.
"If you don't have to ask someone for a PIN and don't have to validate that, you save three or four seconds and that moves people through the line faster," said Todd Clark, senior vice president and head of the Star Network and debit processing group for First Data. "That doesn't seem like much until you apply it to a long line at McDonald's."
While the card networks have painted a bullish picture on the EMV migration, there have been many challenges.
Only six months after the U.S. liability shift, Visa and MasterCard have both made steps to trim a few seconds off of EMV transaction times, providing U.S. consumers and merchants with an option that allows shoppers to remove their cards from the reader at an earlier point in the transaction process.
"EMV transactions in the U.S. are taking longer - sometimes considerably longer - than the equivalent magstripe transactions, leading to dissatisfaction by both consumers and merchants," said Zil Bareisis, a senior analyst at Celent.
Much of the issue is around the consumers' perception of the time they spend at the register. In the consumer's mind, a magstripe transaction ended shortly after swiping the card, even though the process was still going on. With EMV, the consumer is not permitted to remove the card until much later in the process.
"While the actual duration of the transaction may not be significantly longer in many cases, the perception that it is longer is as important," said Thad Peterson, a senior analyst at Aite Group. "I expect that there will be continued pressure to alleviate both the perception and actual issues related to EMV latency."
Debit cards pose a particular challenge in the chip migration, given the regulations requiring at least two network options to verify and route debit payments. That's causing delays in the debit EMV migration, and more headaches among issuers and merchants that are trying to keep up.
In this environment of complex regulations and changes in user experience at the point of sale, financial institutions want choices, Clark said. That demand feeds not only the PINless option for small payments, but the signature debit option as well, which the company hopes will enhance First Data's appeal to clients struggling with the debit card regulations.
"We're focused on transforming Star from PIN debit only to a full service option that can complete transactions regardless of verification methods," said Barry McCarthy, executive vice president and division head for network and security solutions for First Data.
Star's new fraud scoring engine is designed to access First Data's considerable transaction data—which is constantly expanding and can inform real-time updates in how the security technology spots potential fraud. It's an enhancement that should prove helpful since PINless users are presenting less information at checkout.
"Traditionally in a PIN only environment where the consumer is swiping or dipping a card, the fraud rate is low. As you introduce card not present payments and PINless debit, you think more about security," Clark said. "With this new fraud product we've skipped right past a rules based engine and went to a learning environment."