If the Merchant Advisory Group is nothing else, it sure has been a persistent voice in supporting chip-and-PIN card transactions as the most-secure option for eventual U.S. acceptance of EMV smart cards.
In addition, the group remains adamant that chip-and-PIN, and not the chip-and-signature cards many banks intend to issue, represents the most-viable option that gives merchants a reasonable return on the equipment investment needed to accept smart cards.
The Merchant Advisory Group doesn’t intend to be a lone voice on the matter. Its board of directors is contemplating some strategies to sway card-brand, issuer and consumer opinion toward chip-and-PIN, Mark Horwedel, CEO of Minneapolis-based organization, tells PaymentsSource.
“First, we have been speaking to other retail trade organizations, and many of them agree with us on chip-and-PIN. But we are asking them to make their views public,” Horwedel says.
The Food Marketing Institute has long backed the chip-and-PIN technology, Horwedel says. As such, that organization outlined its belief that banks don’t have any incentive to push PIN transactions as the best way to cut fraud (
A representative of the Arlington, Va.-based Food Marketing Institute was not available for comment.
Getting others to speak out represents one step, but Merchant Advisory Group members plan to monitor banks and provide a “scorecard” on the group’s website outlining whether those banks issue chip-and-PIN or chip-and-signature cards, Horwedel says.
“The list on our website will allow merchants to decide for themselves which banks could save them money” with less fraud risk, he adds.
The group also intends to target consumer groups as a way to get more information about fraud potential out to the general public, Horwedel notes. In addition, he advises merchants to educate consumers about the benefits of entering PINs.
The group has zeroed in on various aspects of the debate, particularly over whether consumers understand liability regulations and card-brand rules in cases of unauthorized transactions, which statistics show would be more common with chip-and-signature (
Though it would not be part of the group’s overall strategy, Horwedel predicts U.S. merchants may refuse to replace worn out signature-capture devices if they know chip-and-PIN is available. In addition, merchants likely will begin taping over the card swipers on their terminals, as has become common in Europe.
“I think taping the card swiper will just happen naturally because the merchants will know that if chip-and-PIN is available, the fraudsters will be flocking to the transactions still swiping mag-stripe,” Horwedel says.
Getting all of the retailers to speak as one voice about chip technology is a tall order, merchant-acquiring consultant Paul Martaus of Mountain Home, Ark.-based Martaus & Associates tells PaymentsSource.
“The Tier One (largest) retailers will accept whichever technology is out there that they are told to use because the card brands are likely already cutting deals with those companies to keep everyone happy,” he contends.
Other merchants “can jump up and down and gnash their teeth,” but the chip-technology question represents “power politics at its best,” Martaus says.
Martaus agrees with the retailers’ position of standing firm for a specific technology, but he suggests that maybe chip-and-PIN is the wrong technology.
“Why are we replacing a 50-year-old technology in the mag-stripe with a 30-year-old technology in the embedded computer chip?” he asks. “It might be time to get behind a new, emerging alternative technology.”
Horwedel agrees.
If the card brands don’t modify rules to require chip-and-PIN, and the issuers decide on chip-and-signature, the merchant community will lose interest in the EMV project, he suggests.
“Merchants would consider that EMV equipment upgrades and Payment Card Industry data security (standards) compliance costs far outweigh any (cost savings from fraud reduction) from chip-and-signature,” Horwedel says. “In that case, it would be time to support an emerging technology.”
Card networks and banks aren’t likely to budge on the issue because they want to preserve the existing legacy systems for accepting signature transactions, Martaus contends.
Retailers could put an end to the debate by seeking the most secure terminals possible, he says.
“If a retailer said I want a terminal with advanced encryption service capable of accepting EMV chip insertion and Near Field Communication, that terminal would be very secure, and chip-and-PIN wouldn’t matter as much,” Martaus adds.
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