Why Walmart's Lawsuit Over Chip Cards Is Important To Consumers

by Sarah Grotta 0

A contributor for Forbes jumped into the controversy over the Walmart V. Visa lawsuit. In case you missed the headlines, the lawsuit is about Walmart’s insistence that consumers use PINs at the POS, and Visa’s stance to uphold consumer choice:

Recently, Walmart, the country’s largest brick-and-mortar retailer filed a lawsuit against VISA, the country’s largest credit card issuer, for requiring the retail giant to allow customers to use signatures when paying with their chip-based cards as opposed to more secure PIN numbers. And if Walmart has its way, the case will be decided by a jury of the very American consumers that are most affected by credit card fraud.

Unfortunately, they didn’t get the story quite right. The story suggests that EMV will help with counterfeit fraud, which is correct, but insinuates that the remaining types of the card fraud could be dealt with if only PINs were required:

New chip-based cards are effective when it comes to reducing the risk of counterfeit fraud which accounts for about 37% of fraud in the U.S. However, because card issuers chose to continue requiring signatures as a form of verification, American consumers are still vulnerable to the other common forms of fraud which account for around 59% of fraud in the U.S.

In actuality the majority of the non-counterfeit fraud is from on-line and mobile transactions, where PIN is not used and can’t solve the fraud issue.

The article also focuses on adding PINs to credit card transactions as is common in many non-U.S. countries This is a bit of a disconnect, however as the lawsuit that Walmart brought is specific to debit cards only.

So will this lawsuit be important to consumers? I suspect that this lawsuit will take so long to meander through the court system, the payments landscape and fraud management will have changed completely and new forms of authentication will have replaced PINs.

Overview by Sarah Grotta, Director, Debit Advisory Service at Mercator Advisory Group

Read the full story here

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