As preparations unfold for the U.S. payment system to convert to smart cards, merchants across the country would prefer to see a clearer process established to reach that goal.
Even more so, merchants are adamant that any initiative for accepting chip cards backed by the EMV security standard establish the chip-and-PIN method instead of the chip-and-signature option Visa Inc. and some issuers say they will support, for the time being at least (see story).
Those points were the focus of recommendations the Minneapolis-based Merchant Advisory Group made this month for a U.S. electronic payments roadmap that stresses the importance of chip-and-PIN.
Key players in the U.S. payments industry need only look to at the EMV migration processes that unfolded in Europe and Canada to realize a strong consensus for smart card migration gets the attention and approval of card networks, Mark Horwedel, CEO of Merchant Advisory Group, tells PaymentsSource.
Industry attention to EMV cards in the U.S. went into overdrive when Visa announced in August its incentives and deadlines for merchant acceptance of smart cards and contactless technology (see story).
“The card networks know their brand experience is uneven across markets and that it is time to do something about it,” Horwedel says. Plus, industry experts know fraudsters are migrating their attacks to the U.S. because the country has no chip-and-PIN fraud protection in place, he adds.
The fact that other card networks have not joined Visa in the push for chip card technology represents a troubling aspect for the merchant group because it illustrates a lack of consensus, Horwedel says (see story).
The Merchant Advisory Group seeks common ground on a migration roadmap while emphasizing chip-and-PIN with branded networks, banks, acquirers and processors, Horwedel says.
“Visa made the initial announcement, but the merchant group looks to create a consensus that would have influence on all of the card networks,” Horwedel adds.
The group says merchants are anxious to convert from magnetic stripe card acceptance to smart cards, but they do not want to feel forced into other payment technologies such as Near Field Communication if they do not feel it is economically feasible, Horwedel notes.
Merchants may find reaching a consensus a slippery slope because of the complexities involved in the conversion, acquiring consultant Paul Martaus of Mountain Home, Ark.-based Martaus & Associates tells PaymentsSource.
To have any success at adhering to Payment Card Industry data-security standards and avoiding costs related to PCI, merchants would have to convert terminals to include chip readers and tap-and-pay technology, Martaus said.
In addition, banks are not mass-issuing chip-and-PIN cards, instead making them available only to upscale clients who travel around the world, Martaus suggests.
“Visa wants tap-and-pay so they can remain in the payments game, relative to chips being set in mobile phones,” Martaus notes. “Merchants have to accept that the PIN portion may not really be relevant in that case.”
Merchants believe signature devices tend to wear out and have to be replaced and that consumers writing signatures slows down the checkout lines, Horwedel contends. In addition, merchants accepting signature cards must keep receipts in case of charge-back claims, which in some cases could mean rummaging through reams of paper receipts, he notes.
“It’s difficult for a consumer to deny he made the purchase if his PIN was submitted,” Horwedel says.
Merchants contend that for every $1 lost in PIN transactions, $1,000 is lost on signature transactions because of charge-backs, Horwedel says.
In general, merchants favor chip-and-PIN because they do not want to make a huge investment in point-of-sale preparation without the return on that investment of the security PIN provides, Horwedel notes.
“The group feels it is a small step for issuers [to distribute chip-and-PIN cards] compared to the [point-of-sale] upgrades the merchants will have to make,” he adds.
The Merchant Advisory Group also supports the notion that liability in fraud cases should be placed on whichever party fails to adopt the fraud-prevention measures of chip-and-PIN, Horwedel says.
In addition, the group supports technology advancing chip-and-PIN use in online purchasing, Horwedel says, citing the announcement from Shazam network last week for PIN use in mobile payments as a positive development (see story).
The group has increased its lobbying efforts in light of indications that not everyone in the industry sees eye-to-eye on the topic (see story).
Mostly, the group would prefer that the U.S. payments industry reach a consensus on a plan for processing and security reasons, much in the same manner as Canada did during its five years of planning for conversion to EMV technology, Horwedel says (see story).
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