For the past two weeks, Visa, MasterCard and Discover have been meeting with each other and with regional debit networks to hammer out the business agreements necessary to route debit transactions on EMV-chip cards in the U.S.
The card brands have agreed to nearly-identical timelines for EMV-chip card adoption in the U.S., but to route EMV debit payments they need to decide on a common application identifier (or a handful of identifiers) to meet the requirements set by the Durbin amendment.
The EMV Migration Forum put the ball in the card brands' court two weeks ago when announcing its recommendation of a single common AID on EMV chip-based debit cards. The application identifier has been a major debate in the U.S. payments industry for the past year. Other EMV countries have single debit networks, and have thus not had to undergo the same process.
Each card brand has licensing agreement teams working out their business agreements, says Stephanie Ericksen, Visa's head of authentication product integration.
"In that process, there could be wording that one side or another would like changed, so there is a lot of wiggle back and forth," Ericksen says.
Still, Ericksen feels a lot of progress has been made in the past two weeks, though nothing "visible to the industry at this point."
Even though Ericksen indicates that this process could take some time, an announcement could be coming "in short order," she says.
The Merchant Advisory Group is "enthusiastic" that the card brands will follow the common AID recommendation, though merchants still prefer the technology be "owned and controlled by an independent body in order to retain the current competitive balance between debit networks," says Mark Horwedel, CEO of the Merchant Advisory Group.
The payments industry has watched the common AID debate closely. Without an agreement about how to code debit cards and terminals for EMV transactions, issuers and merchants are stuck in a holding pattern.
"The brands must adopt the recommendation for it to be of value" and negotiate the terms between themselves, Horwedel says.
"The rest of us cannot do it for them," he says. "A new timetable needs to be established once the brands have concluded this process."
The EMV Migration Forum announcement resolved the AID debate "to the extent possible," says Aite consultant Julie Conroy.
The card brands are likely to continue the momentum even though the strong competitive interests at stake provide little incentive for Visa, MasterCard, or the Secure Remote Payment Council networks to compromise," Conroy says.
The regional debit networks making up the Secure Remote Payment Council have already declared a preference for Discover's technology in establishing a common AID to be governed by an independent body. Council leaders did not respond to inquiries for this story by deadline.
"The reality is that the announcement came from the EMV Migration Forum, which means the brands were involved in the discussion," Conroy says. "At this point, the brands have a vested interest in seeing a workable solution so that the merchants can move forward with terminal deployment."
If the card brands establish business agreements that keep the forum's recommendation in place, debit cards would have two application identifiers one for the card's brand and one common AID for routing to other networks. For example, a Visa card would have an application identifier for domestic and international Visa transactions, plus a common AID for other routing choices.
Merchants would code their point of sale terminals to allow network selections.
When a merchant chooses a routing option, the terminal essentially "looks up the BIN routing table to see which debit networks the merchant participates in," says Ericksen.
The merchant then chooses a network, based on availability, economics or other reasons, Ericksen says. The Durbin amendment mandates that merchants have at least two options for debit transaction routing.
It won't matter to merchants which cards carry which application identifiers "as long as the technology chosen is supported by EMVco standards and does not take additional certification and testing," Horwedel says.
The key for merchants is that no restriction on routing be required at a point-of-sale level, Horwedel says.
"This is why it is important that all available networks and cardholder verification methods be supported by the use of a common AID on each device," he adds.
Without that clarity, merchants would encounter problems when a cardholder chooses signature authorization and the merchant opens the common AID to find signature was supported only through a branded AID, Horwedel says.
Still, the entire debate has centered on the business issues, rather than technology challenges, Horwedel says.
"If Visa and MasterCard were willing to have their technology governed by a collaborative standards body we would have never needed any discussion around the implementation," Horwedel says.
Randy Vanderhoof, director of the EMV Migration Forum, emphasizes that the business discussions are not finalized. "You can't say everything is certain until all of the agreements are in place," he says.