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Visa moves to streamline chip-card processing certifications

Matt Hamblen | June 17, 2016
After retailer complaints and lawsuits, Visa confronts 'nasty situation'

After months of frustrating delays for U.S. merchants that have been required to roll out payment systems that can accept new, more secure computer chip credit and debit cards, Visa on Thursday announced a series of remedies.

The steps include streamlining Visa's testing requirements and simplifying the terminal certification process. Visa said it would also add resources and technical expertise to cut deployment times in half.

Many retailers complained that it has taken several months to get a sign-off from banks, card companies and their processing partners that the new equipment they have installed is ready to be used. The certifications apply not only to the terminals in stores but also to the back-end systems used to authorize and certify payments.

Visa conceded in a statement from a spokeswoman that even though the conversion from magnetic stripe cards to chip cards has progressed since last year, "some merchants have reported delays in getting chip-enabled point-of-sale solutions through the testing process."

The solutions were mildly welcomed by retailers and analysts, but were seen as too little too late.

"These delays have been a major concern of retailers and they are the cause of significant unwarranted costs," said Mallory Duncan, general counsel of the National Retail Federation, which represents 18,000 U.S. retailers, including some major chains. "This Visa news is good to hear, but for many of our members it is too little, too late."

Duncan said it is uncertain whether other card companies and banks will embrace Visa's approach. "It's a nasty situation now, and others in the industry are saying Main Street merchants are facing their demise as a consequence of the way the [card] networks and banks have handled" the chip card conversion.

Duncan said retailers have been held hostage by a liability shift imposed by banks last October that required them to update their terminals and systems to support chip cards or the stores would bear the cost of fraudulent purchases. Since October, many retailers have seen big increases in the "chargebacks" they owe to banks for fraudulent purchases, even as they wait for certifications of equipment they have installed.

Major retailers like Walmart prepared their in-store systems for chip cards well in advance of the liability shift, but many mid-size and smaller retailers faced a backlog in testing and certifications.

The result has been that many shoppers don't know how to pay for purchases at various retailers, either relying on the older magnetic stripe card or the chip card. Further complicating matters is whether retailers require customers to use a PIN or a signature to authorize a payment.

"The biggest consumer issue today is the inconsistency of the checkout experience," said Jordan McKee, an analyst at 451 Research. "Shoppers are simply unsure if they should be swiping or dipping their card from merchant to merchant. It's a terrible experience and one that is causing widespread frustration and confusion."


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