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Retailers said to be weighing lawsuits over chip cards, fraud-liability shift

Matt Hamblen | Oct. 2, 2015
Walmart is well ahead on chip credit cards, but still doesn’t take chip debit cards.

He explained that when the specifications for using debit chip cards first were announced four years ago, merchants were forced to pick one debit card processor instead of having the two processor choices that were previously allowed with magnetic stripe cards.

The threat of a merchant lawsuit against banks and card companies is nothing new.

Big merchants have battled Visa and MasterCard in the courts over the costs for credit and debit card processing costs for years, going back to at least 1996, after which credit card companies paid a group of large retailers $3 billion in an antitrust settlement in 2003.

Officials at Visa and MasterCard didn't comment on the possibility of a new lawsuit. But a spokeswoman from MasterCard did say in an email, when asked about possible legal action,: "MasterCard reiterates that security is not a destination; it's a journey, and the evolution to chip technology won't happen overnight."

Walmart's been prepping for chip cards for nine years

Walmart said Thursday it has been processing chip credit cards -- but not chip debit cards -- since last November when thousands of terminals in 4,600 stores had been converted. The process started nine years ago, said Walmart spokesman Randy Hargrove in an interview, because the company does business in other countries that are already using chip cards and saw the trend coming to the U.S.

"We've been well ahead of the game on this," he said. The retail chain posted a blog Thursday with a video explaining how to insert a chip card into one of its terminals.

While Walmart has already had the ability to accept chip credit cards, it still has not yet turned on the ability to accept chip debit cards. (A Computerworld reporter tested a chip debit card recently at a Walmart in Harrisonburg, Va., and it failed to work on three tries, although the card did function when used as a traditional magnetic-stripe card.) Hargrove said the debit capability will be possible later this year, but didn't specify a date. "Debit cards are coming soon," he promised.

Walmart also supports heightening chip card security with the additional use of a PIN supplied by customers. Earlier this week, Visa officials argued against the use of PIN, saying use of chip cards with a customer's signature instead of a PIN is the growing trend in Europe and Canada, contrary to the findings of many U.S. retailers.

Analysts expect merchant lawsuits

While Walmart seems to be on top of the chip card conversion, MAG and analysts have said there are many large, medium and small businesses that are not ready.

Given the complexity of the conversion and concerns about fairness with liability, lawsuits seem inevitable, analysts said.

 

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