Best Buy Co. Inc. has made good on threats it made in July to drop acceptance of Visa Inc.’s contactless payWave cards because of the interchange rates the network applies to them, according to an industry analyst.
The retailer no longer is accepting payWave at its more than 1,000 retail locations because Visa prohibits the use of PINs to authorize the transactions, forcing retailers to accept more-costly signature-based transactions, says Nick Holland, a senior analyst at Boston-based consulting firm Aite Group LLC.
Retailers pay roughly double the amount in interchange fees for a signature-based transaction compared with one initiated with a PIN, notes Holland.
Best Buy began accepting Visa contactless cards in August 2007. In July, the retailer issued a statement expressing dissatisfaction over Visa’s payWave signature policy and the high costs associated with it. Best Buy noted it was evaluating the continued acceptance of payWave cards at that time.
The retailer began no longer accepting Visa payWave cards in October and completed the cutoff in November after discussions with Visa did not produce agreeable changes, according to StorefrontBacktalk, an online news site that reports on information technology at retail stores.
Best Buy’s actions unlikely will affect the acceptance of other contactless brands, such as MasterCard Worldwide’s PayPass, notes Holland. “This is a one-off battle between Visa and Best Buy,” he says. “I don’t see it spreading much given the low contactless adoption. I don’t think it’s the start of a revolution, probably just a flash in the pan.”
Visa’s devotion to signature-based contactless transactions, however, poses an obstacle to adoption of EMV cards in the United States, says Holland. “Visa insistence on signature is fundamentally what is holding back EMV,” which requires consumers to enter a PIN at the point of sale to complete a transaction, he says. “The interchange that they get [from signature transactions] far outstrips the fraud reduction that EMV provides.”
Representatives from Visa and Best Buy could not be reached for comment.
