Industry debates centering on the eventual U.S. conversion to EMV smart card acceptance at point-of-sale terminals have taken on several layers.

And one that has not received much attention involves whether consumers understand their liability in the EMV security equation.

For the most part, merchants, acquirers and issuers have contemplated the pros and cons of chip-and-signature versus chip-and-PIN cards and whether the cost to convert terminals to support EMV transactions is worth the increased security chip card technology provides (see story). 

In addition, questions remain about liability shifts based on whether the merchant or acquirer is providing the most secure technology, particularly when Discover Financial Services did not declare a stance on that issue in its EMV timetable statement (see story).

The Merchant Advisory Group, a vocal proponent of chip-and-PIN as the only reasonable option for such a massive switch in payments technology because of its higher security level, wonders whether consumers monitor their accounts closely enough to adhere to liability policies should unauthorized use of their EMV cards occur.

Networks and issuers may be pushing consumers toward chip-and-signature with “zero liability” policies, but such provisions come with some caveats, Mark Horwedel, CEO of Minneapolis-based Merchant Advisory Group, tells PaymentsSource.

Because of the potential for lack of attention to their accounts, consumers are best protected with a chip-and-PIN standard in the future, Horwedel suggests.

Horwedel and the merchant group view unaware consumers as part of the argument for chip-and-PIN as an accepted standard.

In addition, Horwedel remains unconvinced banks would not hold consumers accountable for fraudulent transaction costs, even when EMV is in place, if they fail to report illegal transaction activity well past the federal deadline of 60 days.

In the current world of mag-stripe cards, the card networks initiated zero liability policies designed to protect consumers even further than federal regulations. MasterCard and Visa both do not hold cardholders accountable for fraudulent transactions, though MasterCard’s policy does not cover PIN transactions.

Visa covers PIN transactions processed through its Interlink point-of-sale debit network, encouraging cardholders that signatures best protect their purchases. Some but not all issuers will provide similar liability protections for PIN-based transactions processed on other debit networks.

Industry experts do not foresee the networks changing those policies, especially with a favorable leaning toward PIN, when EMV becomes the standard.

“The banks feel consumers are well-protected on signature-debit transactions,” Patricia A. Sahm, managing director at Auriemma Consulting Group, tells PaymentsSource. However, banks in the post-Durbin era realize debit transactions are not much of a money-maker, and that may possibly result in adjusting policies, she adds.

“There was an advantage in running debit transactions with signatures so they could run on the credit [network] rails rather than the debit [PIN-network] rails” because of the higher interchange income, Sahm says.

The Durbin amendment, however, essentially halved the signature-debit interchange revenue for issuers and made the differences between signature and PIN rates minimal.

Beth Robertson, director of payments research at Javelin Strategy & Research, suggests that just because EMV technology is designed to reduce fraud, issuers would see no justification to change liability policies that might somehow negatively affect consumers.

“I understand why merchants would have concern for the consumer who might be unaware of a fraudulent transaction, but the merchants have a greater liability concern if they don’t have EMV technology in place by the 2015 deadline established by the networks,” Robertson suggests.

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