BALTIMORE–Two large merchants here at NACHA’s Payments 2012 conference expressed decidedly negative views toward the U.S. path to EMV chip card adoption.
During a panel discussion, representatives from The Home Depot Inc. and movie theater operator AMC Entertainment Inc. cited among their top beefs a lack of consensus on whether the U.S. will embrace a chip-and-PIN approach or merely require a signature for chip card transactions. Another concern is whether merchants will experience any financial benefits from such a conversion, they said.
The merchants agreed the EMV standard adds a layer of security against counterfeit card fraud by blocking replication of magnetic stripe data. But the cost to shift to EMV is not necessarily worth the effort in the existing interchange environment, they suggested, while also citing the confusion over how issuers and merchants will implement EMV and who will benefit.
Visa last year announced a series of incentives to encourage issuers and merchants to adopt EMV technology over the next several years, including a liability shift for fraudulent transactions beginning in 2015 for merchants that do not adopt EMV (see story). Visa's announcement left the door open to those implementing the technology to decide whether they want to enable chip card acceptance with only a signature instead of a PIN, which some observers say has created industry confusion.
MasterCard in January released its own EMV guidelines that lean more toward using PINs (see story).
Visa's promise that merchants adopting EMV as early as this year will get a break on Payment Card Industry data-security standards compliance efforts is not a big enough incentive, Terry Crawford, AMC senior vice president and treasurer, told attendees.
Foregoing certain PCI-audit costs "is not enough money to [motivate] us to shift to EMV," Crawford said.
And merchants should pay a lower interchange rate or receive some other, unspecified type of financial incentive in return for going to the "excessive effort" of implementing EMV, which primarily will benefit banks by lowering their fraud costs, said Malcolm Nunes, Home Depot senior manager for financial services.
The PIN-versus-signature controversy also likely will not be easily resolved, the merchants contended.
Some U.S. card issuers initially are pursuing a chip-and-signature approach to EMV instead of the chip-and-PIN route used in most global markets, but both large merchants said they are staunchly against broad adoption of EMV that does not require PINs.
"PIN is obviously the means of true authentication," Nunes said.
Merchants approving chip card transactions based only on a signature is "not going to happen," Nunes said, noting merchants would prefer PIN-based EMV transactions to ensure transactions are valid in case of customer disputes.
Moreover, Home Depot has no real business case to support EMV in its present guise, Nunes said.
"A liability shift is nothing more than preserving existing liability," he said. "Right now, there is a stick, but no carrot. There is almost an argument (to be made) that I should wait until after the liability shift to see what my losses are, then I will have a business case."
Even if issuers and merchants agree to push ahead with broad EMV adoption, AMC's Crawford is skeptical whether the U.S. could be EMV-ready by 2015, when Visa's liability shift is set to take place.
"I'm not certain the timelines laid out so far are hard and fast," Crawford said. "There will need to be a tremendous investment, ... but if you look at how things have played out (in other countries) over the years, the timelines will have to be moved. We'll wait and see."
Meanwhile, Home Depot’s point-of-sale mobile payment test with PayPal Inc. is going well, Nunes said (see story).
"One of the reasons we (teamed with) PayPal is that they were aligned with us," Nunes said. "A lot of other digital wallets are pass-through systems based on existing (payment methods). Why would I sign up with a Google (Wallet) when all that is in it is a MasterCard (payment method)? It (would just be) driving a mix of transactions that would be more expensive."
Home Depot's partnership with PayPal creates a "blended" cost for transactions that is palatable to both sides, Nunes said, declining to specify how costs compare with traditional payment methods, including cards.
Integrating the new technology was "not as bad as we thought," and fraud is not a concern, he said.
"It is early (in the PayPal partnership). but the (fraud risk) is something we are reasonably comfortable with and will continue to monitor," Nunes said.
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