Consumer Payment Card News

DUMB OR SMART CREDIT CARDS?

EMV-Saudi-Arabia-1Truly the U.S. consumer marketplace is the most advanced in the western world but it is a global laggard when it comes to credit card or debit card security. If the U.S. would upgrade from dumb signature-based cards to smart credit cards, like EMV chip cards with PINs, it would eliminate counterfeit payment card fraud at the point of sale. However, this would be a costly upgrade short-term but extremely beneficial long-term. Furthermore, we would all sleep better, confident that our cards cannot be hacked in the real world.

The largest payment card network in the world is frustrated with the lack of progress towards smart cards in the U.S. and the misinformation about recent data breaches in the U.S.. The Visa CEO Charles Scharf opined this way two weeks ago to investors:

In regard to the recent payment industry data breaches: “we understand that these events are terrible for everyone affected. Everyone is the merchant,the issuer, the acquirer, the networks, but most importantly, the consumer. And while the consumers are generally protected by the network rules of zero liability, meaning they are not responsible for any fraud due to the breach, we all have to realize that these compromises are disturbing to them, they’re inconvenient and they raise broader data security concerns that the entire industry must solve.”

“Unfortunately many merchants, issuers and both of their lobbyists are attempting to assign blame in the press and not reacting in a particularly constructive manner, and it’s in all of our best interests that this change quickly. Within the payments ecosystem, the impact on the merchant, the acquirer, the issuer and the network are all equally negative. We all share the same customer who is going through this difficult experience. And our sales and long-term relationships with that customer will suffer if we don’t work together to get to a better place.”

“The appropriate way to respond to this issue for all parties to jointly work together towards better data security standards and better payment security standards. Maintaining trust in the electronic payment systems is our highest priority, and we’re actively exploring new ways to enhance the safety and security of the payment system.”

“To that end, we do believe it’s critical that we make progress toward the implementation of EMV chip in the U.S. We can’t do this on our own; we need merchants, acquirers and issuers to be supportive. We know it’s extensive. It means new cards, new terminals, new software development; but, as we can all see, it is necessary. It’s our hope that all issuers and merchants will migrate to EMV, but we also understand that it’s complex.”

“There are an awful lot of terminals out there, an awful lot of cards that have to be updated and this has to be done in a way that does not disturb commerce. In 2011, we had announced a plan to migrate the U.S. to EMV technology through a liability shift beginning in October 2015 and we’ve reaffirmed these dates.”

“EMV, to be clear, would potentially eliminate the ability to reproduce the card and thereby reduce, if not eliminate, counterfeit fraud at the point of sale, but it’s also important to note that it’s equally imperative that the industry move towards tokenization, which should be equally effective at reducing or eliminating card-not-present fraud.”

“As we work towards a better solution, we’re also redoubling our efforts to make sure that consumers understand that they’re protected. We’ve invested in national advertising to reassure customers of the zero liability fraud protection. These important protections shield our consumers in the U.S. from bearing any fraud loss after data compromise, as I said before. We’re also focused on making sure that there’s clarity of fact with the media, and in Washington.”

“I’m personally concerned about the amount of misinformation you read in the public domain from confusion around who incurs
the cost of fraud losses, to the misrepresented lack of payment system security. This is misleading, inaccurate and not helpful and can have unintended public policy consequences. We’re actively engaged with policymakers in Washington, D.C., along with our partners to ensure that they actually hear the facts and understand the multiple layers of infrastructure that protect the payment system.”

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