Nearly a month has passed since Visa Inc. offered its technology for the creation of a common debit code for EMV chip-card payments — a necessity under federal regulation. Yet it is becoming apparent that issuers remain in a waiting game that could last several more months.
Such a code is required to meet the federal requirement of providing merchants a choice of networks to handle debit payments. The reason this became a hassle is the EMV standard was designed to work in countries without such a need.
MasterCard and Discover separately offered to move all debit transactions through their networks, which would call for a switch to their rails. This approach differs from the generic, common code Visa has offered.
But regional PIN debit networks such as Shazam are not likely to agree with any of the card brands' offers.
"Neither proposal from Visa nor MasterCard fulfills the requirements that the Secure Remote Payments Council agreed upon last year," says Terry Dooley, senior vice president and chief information officer for Shazam.
As such, the proposed common codes won't be accepted and Shazam and other debit networks plan to reveal details of their own proposal for a common code solution, hopefully by the end of March, Dooley says. The payments council consists of leading PIN debit networks such as Star, NYCE and Pulse.
"The other proposals, as presented, are not reasonable and can't fulfill the needs of the U.S. market," Dooley says. "It restricts innovation and independence, and the brands would dictate how and when things would move forward."
Visa's proposal doesn't include contactless technology, whereas MasterCard's does, Dooley says. However, Visa includes ATM transactions, but MasterCard excludes them.
Despite the potential falling out of regional networks, Visa officials have "been on the phone non-stop" since announcing its common AID offer in discussing the technology with major issuing clients, merchants and networks, says Stephanie Ericksen, Visa's head of authentication product integration.
"Those parties are going over their wish lists, and maybe our proposal doesn't meet with all the elements of those lists, but they do recognize it as an option to move forward with the EMV timetable," Ericksen says.
Within the next two months, Visa plans to provide documents to issuers, merchants and acquirers about how to implement the common code on cards and terminals, Ericksen says.
The major issue, Dooley says, is that EMVco specifications and card brand rules do not allow the choice of an application identifier, or AID. Rather, the current network rules call for certain applications to be rated as highest priority, and then the point-of-sale terminal selects an AID it supports, he adds.
"That contradicts the Durbin amendment [routing requirement]," Dooley says. The ideal approach would combine card networks' proposals under a neutral governing party, Dooley says.
The U.S. market hasn't had to deal with a coding issue in some time that involves so many parties, says Randy Vanderhoof, acting director for the EMV Migration Forum and president of the Smart Card Alliance.
Vanderhoof acknowledges that regional debit networks like NYCE, Star, Shazam and others continue meeting to discuss the common code and what additional concessions or capabilities they would like.
Because complexity in the debit network increases when the number of apps on a card increases, the network executives are facing "a fairly complex and difficult decision," Vanderhoof says.
Ultimately, the industry could end up with debit cards that have to support as many as 10 or more debit applications, and then the merchant has to choose where to route the transactions.
"It's much easier to manage with only two network choices," Vanderhoof says.
It is already difficult to differentiate one network from another, but the discussions get even more complicated at small firms that work through independent sales organizations because "it brings in a whole new set of people into the discussions," he says.
Ericksen says issuers have mostly been positive about Visa's common AID, but network providers are "talking it through" to make sure Visa's approach would align with their own business goals.
"All of the parties are talking about who will be capable of providing a solution, but issuers will have choices because some networks may want to create their own AID," Ericksen adds.
If the networks make their own AID, it will make for "some very interesting competitive plays," Vanderhoof says.
"Do the debit networks take the time to create their own AID, and potentially lose business?" Vanderhoof asks. "Or do they agree to the Visa code and maybe stifle some of their own business goals?"
Ericksen says any decision in which multiple parties have to agree takes time, which is why Visa offered the common AID as a way to move EMV migration along quickly.
Jason Oxman, CEO of the Electronic Transactions Association, says the ETA is getting feedback from its members about the various approaches to share with the card brands.
Some have suggested it may be possible for more than one common AID to exist in the payments ecosystem, Oxman says.
"Whatever the outcome, we cannot complete a successful migration to EMV until we have broad agreement on the proper technical solution to debit routing," he says.
If most parties agree that Visa's common code and MasterCard's offer to use its rails represent the best solutions, it would not take long for issuers and acquirers to proceed, Vanderhoof says.
"Everything could move quickly because those network connections have been made in the past," he adds.
Whatever happens, the migration to the EMV standard may still face delays due to other factors, says Brian Riley, senior research director and analyst with Needham, Mass.-based CEB TowerGroup.
"The fact that many issuers and merchants do not believe a good business case for EMV has been established yet still lingers over the whole process," Riley says.