Visa Inc. has thrown its counterpunch at Walmart, saying the retailer had previously agreed to accept signature debit transactions in addition to chip-and-PIN transactions at its point of sale terminals.

It's the basis of a countersuit the card brand filed this week against Walmart, with Visa also saying Walmart has been testing a protocol -- without informing Visa -- to eliminate signature verifications when a customer presents a Visa debit card.

Walmart had sued Visa in early May on the grounds the card brand wanted the retailer to accept debit transactions with signature authorization rather than a PIN. Walmart contends such a move is less secure and designed to assure more transactions are routed to Visa rather than independent, and for merchants less expensive, PIN debit networks. 

Routing of debit transactions has been a murky area for merchants and card networks since the advent of EMV chip cards and the Durbin amendment in the U.S. mandating merchants have a choice of two unaffiliated networks for moving those transactions across processing rails. Merchants have long felt adding PIN to all EMV chip transactions provides extra security and justifies the expensive EMV upgrade. For its part, Visa has viewed signature debit as the easier transition for consumers and less expensive equipment option for merchants.

In its complaint, Visa says it became aware of Walmart's alleged practices after noticing a drop in debit card transactions at Walmart, as well as complaints from cardholders who were unable to use their cards to make payments at the stores.

The ongoing battle between Walmart and Visa is beginning to cloud what is likely the real issue at the heart of the complaints, that being the cost of card acceptance, said Julie Conroy, research director and fraud expert with Boston-based Aite Group.

"When you read between the lines of both lawsuits, it is all about the cost of acceptance, but that is not what Walmart is suing for because they know that a judge and jury might not be sympathetic about something related only to the bottom line," Conroy said.

By adding a few "hot buttons" related to card security, Walmart's message may resonate better with consumers, who generally don't know much about payment processing or its costs, Conroy added.

In the meantime, Walmart stores in Canada established a policy to stop accepting Visa credit cards at its 370 stores across the country, starting July 18, saying those stores pay more than $100 million in card fees annually.

Visa responded to that move with a public letter to Canadian consumers, saying Walmart was "unfairly dragging" millions of shoppers into private negotiations over card fees.

In a statement issued to the media June 29, Visa said it filed its counterclaim on the debit routing charges earlier that day.

"Visa believes the lawsuit at its core is a commercial dispute between two companies," the card brand said. "Instead of complying with the terms of the commercial agreement that the two companies negotiated and agreed upon in 2015, Walmart is attempting to avoid its obligation to provide a signature option for their customers when paying with a Visa debit card."

By doing so, Walmart is "acting in bad faith and never intended to honor its obligation under the agreement," Visa said.

Walmart disagrees with the allegations and is sticking to its contentions in the lawsuit it filed in May.

"We filed our lawsuit against Visa to help better protect our customers," said Walmart spokesman Randy Hargrove. "We have rightfully insisted on the use of PIN for debit card transactions in our stores while Visa has continued to demand the more fraud-prone signature verification which is more profitable to them. PIN debit is the only truly secure form of cardholder verification in the marketplace today," he added.

Other retailers are falling in line with that premise. Two weeks ago, Home Depot filed a lawsuit against both Visa and MasterCard, with similar allegations about debit transaction routing.

And then Kroger food stores sued Visa this week, with its claim alleging the card brand had threatened to raise fees and cut off the supermarket chain's acceptance of Visa debit cards.

It also is not likely that the outcome of these legal battles will have anything to do with PIN becoming more of an authorization standard in the U.S. when used with chip cards, Aite's Conroy said.

"In recent conversations with issuers on this front, with all of the legal stuff as a backdrop, the reality is that lost and stolen fraud, which is the only thing PIN helps, is 9% of total card fraud," Conroy said. "It's just not that big of a deal in the total fraud picture."

Conroy said her research has indicated lost and stolen fraud has gone down while counterfeit and card-not-present fraud has increased. The chip embedded in an EMV card addresses the counterfeit fraud, which card brands introduced in the U.S. in October 2015 with the accompanying liability shift to the party unable to handle EMV transactions.

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