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Card brands and issuers needled about PIN

In advocating for credit chip and PIN, US retailers are using the same 'consumer security' pitch against the card brands that the brands once used to sell EMV to retailers.

November 3, 2015

by Daryl Cornell, CEO, Triton Systems

"You can't have your cake and eat it too," is the clear message from merchants to the card brands and issuers. Miffed at the high cost of EMV upgrades being jammed down their throats via a stealthy liability shift, merchants have begun fighting back. But it is the tactics here that are the real story.

Understand first and foremost that the merchants and the card brands need each other. For merchants, credit cards grease the wheels of commerce. For card brands, merchant transaction revenue keeps share prices lofty and bonuses flowing.

Merchants have decided that they can't win in the court of public opinion with a refusal to upgrade to EMV. Instead, they have determined that if they are to spend large sums making the switch from magnetic stripe to EMV, they will demand the additional security that comes from card brands' and issuers' full adoption of credit card chip and PIN.

While there are a few exceptions, including Target and First Niagara Bank, most issuers have already decided that a premature move to chip and PIN translates to "back-of-wallet" for consumers.

In a country where the average consumer carries three to five credit cards and credit PIN is almost nonexistent, this degree of change is viewed by issuers and card brands as risky to transaction volumes.

As a result, the push is on for nearly all credit cards to be issued between now and the end of 2016 as chip and signature.

"Hogwash," say the merchants (along with most of the rest of the world), who want card brands and issuers to move straight to credit chip and PIN, using their own consumer protection logic against them. Several interesting twists and turns in this battle have occurred already, including:

An FBI notice advocating the adoption of PIN

In what has been described as a highly unusual occurrence, an FBI notice advocating for chip and PIN was taken down just 24 hours after being posted last month.

Speculation is that this was done at the behest of the powerful American Bankers Association, which protested the FBI's statement about the security weaknesses of chip and signature.

Despite the hasty retreat, score one for merchants in getting the FBI to acknowledge (at least briefly) that chip and signature is vastly inferior to chip and PIN.

Congress urged to get in on the act

The National Retail Federation is actively lobbying Congress to mandate credit chip and PIN. The NRF argues that its members are absorbing all of the costs of a move to a partial EMV solution.

In an ironic twist, the NRF is now using the same "consumer security" argument against the card brands that card brands once used to sell EMV migration to the U.S. retail industry. Whether or not Congress acts here, score another point for the merchants in the public opinion battle.

Target on the leading (or is it bleeding?) edge

After being bled — both at the cash register and in court — by its 2014 data breach, Target is now swimming against the chip-and-signature stream. In contrast with nearly all other issuers, Target has announced that it will replace its own debit and credit cards with chip-and-PIN-only cards by early 2016.

If, as conventional wisdom insists, consumers balk at remembering a PIN number for their plastic, the results could be financially devastating to Target.

On the other hand, should consumers heed the actions of the FBI, Target and perhaps even Congress, Target could reap a windfall in sales to security-conscious shoppers.

Say what you will about the U.S. conversion to EMV, it has yet to be drama-free. Stay tuned as merchants continue to turn up the heat on issuers and the card brands in the call for credit chip and PIN.

This article was republished from the Triton blog, atmAToM, with permission from Triton.

photo istock

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