“Visa has acknowledged in many other countries that chip-and-pin offer greater security”, said Wal-Mart spokesman Randy Hargrove.
Advertisement
The suit, filed in the New York State Supreme Court, alleges the current system, in which a chip card user authenticates the purchase with a signature, is “fraud prone”. Instead, Visa requires that customers use a signature with the pads, which Wal-Mart claims puts customers at risk.
Wal-Mart says it prefers PINs because they are more secure than signatures. Wal-Mart then changed the practice to allow for signatures after Visa required it to do so, citing the terms of its contract with the retailer. Most recently, Wal-Mart sued Visa in 2014 over card fees charged to merchants.
Wal-Mart Stores Inc. filed a lawsuit against Visa Inc., saying the payments network is preventing the retailing giant from requiring customers to verify their purchases with a personal identification number when they use a chip-enabled debit card.
The dustup comes in the midst of the transition to chip-based cards in the United States, which began previous year. That’s because cardholder data on cards with magnetic strips can be read, or “skimmed”, by hackers using a card-reading device. Chip cards spit out a unique code each time a transaction is processed. Many countries today require both chips and PIN codes to make purchases using a card. But the USA has been slower to adopt this payment method. Chip-and-PIN cards were first introduced to the U.S. in October 2010, issued under the United Nations Federal Credit Union and targeting elite cardholders.The Smart Card Alliance, a payments industry group, estimated that less than 2 percent of cards had chip technology in 2014. Chips, after all, aren’t a fail-safe when it comes to fraud.
A dispute about EMV transactions has already hurt gift card company Blackhawk (HAWK – Get Report), which spun off from grocery store company Safeway in 2013. Retailers nationwide reached a $5.7 billion settlement with Visa and rival MasterCard in 2012 over allegations that the they illegally fixed fees for credit cards through restrictive rules that prevented merchants from passing along the costs or even disclosing them to customers.
Still, the transition has been slow going due to scale: There are over 10 million credit card terminals and 1.2 billion cards in the United States.
This is a serious issue for the multinational retail corporation, as Walmart claims debit card purchases account for 71 percent of all card purchases in their stores.
Advertisement
Despite the implication of the name, chip-and-PIN cards can be configured to work without PINs. Visa rolled out payment software for chip-enabled cards last month. It said small businesses should not be pressured to install the new equipment.
