In a lawsuit against credit card giant Visa filed in New York state court Tuesday, Wal-Mart said it should be able to require customers to verify purchases with personal identification numbers (PINs) rather than signatures when they pay using EMV chip debit cards.
Wal-Mart alleges that Visa is forcing the retailer to allow customers to use a signature in EMV transactions. Debit cards are used 70% of the time a card-based payment is made at Wal-Mart, according to the Wall Street Journal; Wal-Mart says that PINs are more secure, but as the Journal notes, Visa earns five cents more per transaction when a signature is used.
Visa rival MasterCard leaves the signature-or-PIN question up to the merchant.
Wal-Mart and Visa are once again butting heads, this time over EMV chip-enabled debit cards. While EMV (which stands for Europay, MasterCard and Visa) cards used in Europe, Canada and much of the rest of the world require a PIN as authentication, EMV card providers in the U.S. have bypassed that stipulation.
That solves an issue for the banks, which would have to make significant changes to process the new chip-and-PIN cards. But it also makes EMV chip-enabled transactions less secure, said Mark Horwedel, CEO of Merchant Advisory Group, on a conference call with reporters last year.
“We’ve shouted in the dark for a long time,” Horwedel said. “This is basically a facade—this claim [by banks] that the reluctance is consideration for the consumer. We’ve all used PIN numbers at ATMs for a long time. Let’s go to something that’s better.”
Some banks have opted to go with PINs, and retailers have kept up the pressure. Last month even Discover Financial Services Chairman and CEO David Nelms dialed up the pressure to make EMV credit cards more secure through PINs.
Using a PIN is indeed more secure. So why aren’t they the default choice for EMV switch? Credit card companies and banks have said that requiring a PIN introduces more friction into the transaction process because Americans are used to signing their receipts. Retailers also tend to pay higher transaction fees when a signature is used, while banks often forego those fees when a PIN is used.
“This suit is about protecting our customers’ bank accounts when they use their debit cards at Wal-Mart,” the retailer said Tuesday in a statement cited in several news reports. In addition, Visa “has demanded that we allow fraud-prone signature verification for debit transactions in our U.S. stores because Visa stands to make more money processing."