Fiserv, which operates the Accel debit network, spent two years evaluating the best way to route EMV debit transactions in compliance with federal mandates but it abstained from working with the Debit Network Alliance, which is committed to the same cause.
Fiserv kept apart from the alliance, which formed in December, because it was so deep into its own research and wanted to see that process to its end, says David Keenan, general manager of network solutions at Fiserv. After years of study, this week Fiserv announced an agreement to use MasterCard's common application identifier (AID) for routing EMV debit transactions.
"We've been very thoughtful about exploring how EMV can be implemented in the U.S.," Keenan says. A successful implementation has to effectively control fraud and make a difference in the market, he says.
Fiserv has been active with numerous groups studying the issue, while also exploring various alternatives on its own. EMV-chip cards improve security over magnetic-stripe cards, and the major card networks have set an October 2015 deadline for most merchants to be able to accept the new format.
But adoption of EMV has been slowed by the debate over how best to route EMV debit transactions in compliance with the Durbin amendment, which mandates that merchants have at least two unaffiliated networks to choose from. The industry has been divided over which networks' common application identifiers to use for this purpose.
"We came to the conclusion recently that the time is right now to implement EMV, and part of our conclusion was that partnering with MasterCard represents a simple, streamlined way for issuers to issue a regulation-compliant and merchant-friendly solution for their cardholders," Keenan adds.
MasterCard views the addition of the Accel network as "a terrific move" and acknowledges the time the companies put into securing the pact, says Carolyn Balfany, MasterCard's senior vice president and group head of U.S. product delivery.
"It really does address the central point that common solutions meet all constituents' needs," Balfany says. "It certainly has taken some time, because first we had the regulatory road to walk and now it is about business terms and all organizations getting comfortable with using the common solution."
Fiserv ultimately chose MasterCard because the card brand's single app could deliver U.S. and international transaction routing, as MasterCard already had the Maestro chip application in place.
"I remind people that the solution has been available for years now and is open to all networks," Balfany says.
Whether other networks will offer MasterCard's or Visa's common AID remains to be seen. First Data signed a licensing agreement with Visa two weeks ago to use Visa's common AID for Visa transactions on First Data's Star network.
There is clear momentum toward resolving the issues of EMV debit routing, says Paul Tomasofsky, executive director of the Debit Network Alliance.
Though he hasn't seen the details of the Fiserv agreement, Tomasofsky says "it appears to address the vast majority of the points that the Debit Network Alliance has been advocating for some time now."
Those points include routing choices and multiple verification methods for cardholders on a technology open to all networks. "This is another indication that the alliance is providing value, in that even a network not part of the alliance has been able to get an agreement that achieves what the alliance has been talking about," Tomasofsky adds.
MasterCard and Visa already share technology through an agreement made last summer, Balfany says.
"Visa and MasterCard decided to cross-participate between the two solutions," Balfany says. "There are MasterCard cards with Interlink functionality and Visa cards with Maestro functionality, so we'll still cross-participate."
Even though the individual debit networks will have to sign their own agreements with the card brands, Fiserv's choice illustrates that an issuer won't have to place many different applications on an EMV debit card, Balfany says.
The Fiserv and MasterCard agreement helps the industry move forward to reach an agreement on the common AID, says Randy Vanderhoof, president of the EMV Migration Forum. The solutions being offered now taken into account any potential future changes, he says.
In particular, many are concerned about the long-term effects of a federal judge's ruling last year that said the Federal Reserve Board must reconsider whether a choice of only two networks for routing followed the spirit of the Durbin amendment.
"Anyone who was going to wait for the certainty of what that the final result is, would certainly be left behind," he adds.
Mostly, Fiserv has shown that there will be an end to the uncertainty over EMV debit routing, says Shirley Inscoe, senior analyst with Boston-based Aite Group.
"These kinds of alliances take months, and I have no doubt dozens of people worked through many operational details and contractual issues to make sure it was the right thing for the companies on both sides," Inscoe says.
It is not easy for companies to reach agreements on such technical and critical industry issues as this, Inscoe adds. "It's a great innovation, and America is known for great innovation, and this falls right into that category."