MINNEAPOLIS - The Merchant Advisory Group (MAG), a cross-industry association of large merchants involved in the payments industry, announced its recommendations for a U.S. electronic payments roadmap with a focal point on the importance of chip and PIN adoption.
"We believe it's imperative that the United States align with the international standard of Chip and PIN to ensure global consumer payments interoperability," said Mark Horwedel, CEO of the Merchant Advisory Group. "In today??s U.S. magnetic stripe based payments system, MAG members continue to spend millions of dollars to protect against security breaches with significant and deleterious results. Many have lost sales and struggled through customer confusion resulting from international cardholders' inability to use their chip and PIN cards in the United States."
MAG recommends that the U.S. payments industry undergo a coordinated migration to chip and PIN transactions, which should support a broad range of payment types and devices. Also recommended is the right of merchants and issuers to determine the range of payment types, communication protocols and devices they will support.
PIN authentication is a proven means of reducing fraud. Pursuant to an agreed-upon timeline, merchants and issuers that migrate to chip and PIN should receive the benefit of full liability shift protection. Those who do not invest in chip and PIN, or who decide to not perform cardholder authentication at the point-of sale for customer convenience reasons, should bear the liability of any fraudulent activity that occurs as a result of their business decisions.
To ensure merchant choice in routing transactions and to encourage innovation, chip and PIN card and system designs must provide an open architecture that is developed with meaningful input from all stakeholders. Chip and PIN deployment in the United States should be done concurrently with integration of technologies that would secure e-commerce transactions and also shift liability to any party that does not adopt the solution.
The implementation of chip and PIN should in no way infringe upon the ability of issuers to choose network affiliations or upon merchant routing opportunities as prescribed under the law. The roadmap should acknowledge the diversity of the marketplace by developing collaborative and realistic implementation timelines for all stakeholders including issuers, acquirers, hardware manufacturers and merchants.
Markets where chip cards with PIN verification have been adopted have shown to be much more successful in reducing fraud than those which have adopted chip cards with signature verification. MAG believes consumers, along with merchants, may suffer significant, avoidable damage from fraudulent transactions conducted with insecure magnetic stripe, signature card products.
"Many merchants have missed sales opportunities as a result of not offering chip and PIN as an option at the point of sale. Adopting this payment technology in the States would not only secure our customers?? transactions even further, but alleviate the frustration that some of our international customers have had making purchases at our U.S. store locations," said Lee Jurgens, MAG chairman.