Months after settling a $5 billion-dollar lawsuit against payment card brands, Wal-Mart Stores Inc. (Walmart) filed a civil complaint against Visa Inc. May 10, 2016, in the New York Supreme Court. The Bentonville, Ark.-based retailer is asserting its right to mandate PIN as the only authentication method for Europay, MasterCard and Visa (EMV) debit cards at the POS. Current guidelines enable consumers to use PIN or signature when using chip-enabled cards, a less secure and costlier practice, Walmart representatives stated.
"PIN is the only truly secure form of cardholder verification in the marketplace today, and it offers superior security to our customers," said Walmart spokesman Randy Hargrove. Chip-and-PIN is commonly used in other countries and inherently more secure than chip-and-signature, he added. "Visa nevertheless 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 those transactions."
When Walmart began to require PIN verification of debit cards in 2015, MasterCard Worldwide was supportive, but Visa pushed back, citing violations to its processing guidelines. This prompted Walmart to seek legal restitution. "PIN verification is much more secure than signature verification," the legal document stated.
A longtime member of the Smart Card Alliance, Walmart was one of the first major retailers to adopt EMV following the Oct. 1, 2015 liability shift in the United States. The company has been battling signature interchange for years, legal analysts have noted.
"It is widely accepted that PIN is more secure than signature and costs less to merchants, said Montreal-based attorney Adam Atlas. Atlas noted that migrating from signature to PIN might impact near-term earnings of acquirers and networks, but ultimately using signature as a verification process is unsustainable.
Jamie Henry, Senior Director of Payment Services at Walmart is a chip-and-PIN advocate, and has seen the practice successfully deter counterfeit card fraud in other countries. In a panel discussion at the 2010 Smart Card Alliance's annual summit, Henry called signature interchange "a waste of time" that was slowing down chip-and-PIN adoption in the United States. "Transactions need to be PIN or nothing," he said.
As the ATM industry prepares for its Oct. 1, 2016, EMV liability shift, renewed efforts are underway in that sphere to democratize access to PIN-based debit card networks that are not associated with Visa and MasterCard. The National ATM Council has been engaged in this fight since 2011. NAC has alleged that Visa and MasterCard network rules violate the Sherman Act's prohibition against unreasonable restraints of trade by limiting the revenue that ATM operators can earn.
NAC is seeking a preliminary injunction against ATM access fees that inhibit competition. "By its very terms, the ATM access fee rule prohibits ATM operators from charging a higher access fee for a Visa or MasterCard transaction than they do for a transaction on another network," NAC stated in its revised complaint in U.S. District Court for the District of Columbia, initially filed in 2011. "Thus, the rule prevents ATM operators from charging different fees for different network brands, regardless of differing network costs."
Bruce Wayne Renard, Executive Director of the National ATM Council Inc. could not comment specifically on Walmart legal proceedings because he has not reviewed the suit. "As a general matter, NAC supports efforts to enhance the security of our customers' payment cards, including a fair and reasonable transition to chip technology," he said. "However, NAC vehemently opposes any efforts by the national networks to use the EMV transition to impose excessive liability for chargebacks on ATM Operators or merchants, or to unfairly disadvantage unaffiliated debit networks."
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