Around the world, 80 countries have added EMV chips to their credit cards. These chip cards are more secure than credit cards with only a magnetic strip and have helped to reduce credit card fraud in many places. As a result, these cards are now being introduced in the United States. Many retailers, however, are alleging that Visa and MasterCard are not utilizing the chip to its fullest potential. Home Depot has joined other retailers, like Wal-Mart, by filing a lawsuit against the credit card issuers. Mark Horwedel, CEO of the trader group The Merchant Advisory Group expects more lawsuits to follow.
The lawsuit contends that Visa and MasterCard are not doing enough to prevent credit card fraud, yet are forcing retailers to carry more of the cost and liability for fraudulent credit card transactions. Though the chip cards used around the globe may look the same, they aren’t processed the same way. In most of the countries that have adopted EMV technology, a PIN number is required to complete a credit card transaction. In the United States, however, Visa and MasterCard are requiring only a signature. This makes transactions less secure than they could be. Since retailers are now responsible for fraud, Home Depot alleges that card issuers are not doing enough to protect them from it.
Failure to require a PIN also creates problems for online customers, where credit card processing is done without a signature or other verification steps. For these transactions, chip card security doesn’t help at all unless it is coupled with a PIN.
Home Depot also claims that it costs them more to process non-PIN transactions, forcing them to pay $750 million dollars a year in credit card processing fees. According to the retailer, Visa and MasterCard are intentionally blocking the store’s ability to protect itself from fees and fraud on purpose to drive their own profits. They claim chip card security that requires a PIN would better protect consumer and reduce credit card processing costs.
The Home Depot has reason to be concerned, as the company was the victim of a data breach in 2014 that affected 56 million credit and debit card numbers. The retailer immediately implemented credit card processing that incorporated the chip technology, but would like to do more to protect itself and its customers. The company fully supports chip card security and EMV technologies, but wants American consumers to enjoy the same meaningful fraud protection that Europeans have been enjoying for more than a decade.