What Walmart's Chip-and-PIN Lawsuit Against Visa Means For Merchants
By Christine Kern, contributing writer
Walmart fights back against unexpected higher debit fees.
The EMV liability shift that went into effect last Fall has had an unexpected impact on U.S. retailers, as some merchants have seen their debit-transaction fees increase by approximately 20 percent since October 1, according to Bloomberg. These higher fees have led Walmart to file a lawsuit against Visa Inc. over how debit transactions are being verified. The suit relates specifically to Visa debit cards, not chip-and-PIN credit cards.
In the suit, Walmart alleges that Visa’s policy to allow people to enter signatures at the register leads to more fraud and that the strategy is part of an effort by the payment processer to charge higher fees on debit purchases, CNN reported. This is because in-store payments authorized via signature get routed across Visa’s debit network, which generates higher fees for the credit card company. But Walmart argues that, according to its own data, 91 percent of fraudulent debit card purchases are done with signatures, so the retailer wants to require customers using new debit cards to enter a PIN when making a purchase.
"PIN verification is much more secure than signature verification," said the lawsuit, filed in New York state court. "It also enables Walmart to route transactions across PIN debit networks rather than signature debit networks, which saves Walmart (and its customers) money."
Visa has steadfastly asserted that CHIP alone is adequate security for credit card purchases, and that PINs will not make them more secure. Most banks issuing chip cards have argued that PINS are an unnecessary line of defense for the new cards. VISA continues to contend that “it’s the chip, not the PIN” that is essential for card security.
And yet, “Retailers have long-argued that PINs are essential to providing cardholders with the security that they deserve,” Brian Dodge, executive vice president of the Retail Industry Leaders Association, said in a statement. “And the FBI issued a warning last fall that EMV cards need PIN to avoid fraud, as Innovative Retail Technologies reported.
CIO magazine pointed out that, while the outcome of the Walmart suit against Visa could be slow in coming, it does raise the issue that consumers can demand to use all the security features built into the new chip-and-pin cards to their advantage.
“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,” Wal-Mart spokesman Randy Hargrove said in an e-mail.
Visa has declined to comment on the complaint.