BII
This story was delivered to BI Intelligence "Payments Briefing" subscribers. To learn more and subscribe, please click here.
One of the largest retailers in the world is suing one of the largest financial companies in the world.
Walmart has filed a lawsuit against Visa regarding the latter's policy about how customers verify their debit card purchases at the point-of-sale (POS), according to the Wall Street Journal.
When someone uses a chip debit card, they can either enter a PIN number or sign their names. Walmart wants to mandate the use of PINs, but Visa requires that Walmart present shoppers with both options, which led to the lawsuit. Bear in mind that this lawsuit is one of many between the two companies regarding card acceptance and authentication.
Walmart wants only PINs primarily because of cost. Card networks such as Visa profit from swipe fees that they charge merchants for each transaction, and Visa reportedly charges Walmart five cents more for signature authentication than PIN ones. By forcing Walmart to offer both, it makes more money.
This is especially important because approximately 10% of Walmart's debit users, who represent 70% of the retailer's card payments, authenticate with signatures, most likely because it's easier than remembering and entering a PIN.
Another factor is security. Most nations that use EMV verify exclusively through PIN, but U.S. customers are used to signatures, so many banks offer both. PIN, however, is more secure because signatures can be forged. Walmart, therefore, would want to mandate PIN authentication because it would reduce fraud losses.
This situation is part of a broader trend in the industry in which cardholders prefer to not use PIN authentication. In 2015, only 40% of users authenticated purchases with a PIN, while 60% either did not or were unsure.
If card networks and banks continue to offer signature authentication, then the risk of forgery could offset some of the numerous fraud protection benefits that EMV cards provide at the point of sale.
Fraud cost U.S. retailers approximately $32 billion in 2014, up from $23 billion just one year earlier. To solve the card fraud problem across in-store, online, and mobile payments, payment companies and merchants are implementing new payment protocols that could finally help mitigate fraud.
John Heggestuen, senior research analyst for BI Intelligence, Business Insider's premium research service, has compiled a detailed report on payment security that looks at how the dynamics of fraud are shifting across in-store and online channels and explains the top new types of security that are gaining traction across each of these channels, including on Apple Pay.
Here are some of the key takeaways from the report:
In full, the report:
To get your copy of this invaluable guide, choose one of these options:
The choice is yours. But however you decide to acquire this report, you’ve given yourself a powerful advantage in your understanding of payments security.