Consumer Authentication

Walmart Sues Visa Over PINs

In April 2015, Walmart SVP and Assistant Treasurer Mike Cook told CNNMoney that the EMV rules, as they were being implemented in the U.S., were a “joke.” Cook’s view was that giving signature and PIN equal weight in authenticating the consumer at the point of sale put the customer’s security at risk. His view: Signature is “worthless as a form of authentication.”

Yesterday, Walmart doubled down on its belief that “chip-and-choice” puts customers at risk. Walmart filed a lawsuit in New York alleging that Visa prohibits Walmart from insisting that its customers use a PIN when paying with a chip-enabled debit card at checkout.

Today, Walmart asks shoppers to use a PIN at checkout, but shoppers also have the option to use a signature instead.

“This suit is about protecting our customers’ bank accounts when they use their debit cards at Walmart,” a Walmart spokesman said in an emailed statement to media outlets. “We believe Visa’s position creates unacceptable risk to customers, and its actions and rules are inconsistent with federal law.”

At issue, however, is more than the consumer’s wellbeing. Retailers pay more on signature transactions than they do for PIN payments — roughly $.05 more, on average. A majority (70+ percent, sources say) of Walmart’s chip-based transactions are debit.

“[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,” Walmart said in its lawsuit.

Critics of the “chip-and-choice” position contend that the PIN is the most secure method of authenticating a consumer and that, since consumers are used to using them at ATM machines, they do not create friction for them at checkout.

Proponents suggest that, more than two decades ago, when EMV was introduced, payments infrastructures were not as advanced, and a PIN was essential to authenticate the consumer. Today, they say, payments infrastructures and fraud systems are more sophisticated, and a PIN is no longer essential. Further, they say, deploying a signature-based solution was faster and cheaper for merchants and processors in the U.S. given the liability shift timetable.

Visa has not provided public comment on the matter. However, last April, after Cook’s remarks about EMV, Stephanie Ericksen, VP of risk products at Visa, was quoted as saying: “We don’t see a need for it, [as chip-and-PIN] will have a shorter shelf life,” she said, suggesting that newer technologies would deliver new opportunities to innovate the current EMV experience.

Walmart and Visa are a familiar duo in the courtroom. Walmart sued Visa back in 2014 for more than $5 billion over interchange fees, claiming that it had charged the retailer “unreasonably high fees,” for consumers who paid with cards.

The lawsuit alleges that Visa “engaged in a conspiracy with some of the nation’s largest banks” to fix fees charged during credit card transactions. That issue remains outstanding.

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