BENTONVILLE, Ark. -- In an attempt to end a Visa requirement that lets customers sign for payment when using computer-chip-enabled debit cards, big-box retailer Wal-Mart filed a civil lawsuit against credit-card giant Visa Inc. earlier this week in New York State Supreme Court to stop "signature debit."
The so-called "chip-and-PIN" battle is one convenience-store retailers have supported because it's cheaper and reportedly more secure than signature transactions. With the likes of Wal-Mart taking action, many hope it will eventually have trickle-down benefits.
The suit claims that the Visa allowance violates the Durbin Amendment to the 2010 Dodd-Frank Act. That measure gives retailers that accept debit cards the right to choose the transaction route, or more specifically, prohibits any party from directing that processing path.
The suit claims that in forcing retailers to accept signature verification on chip-enabled debit cards, Forster City, Calif.-based Visa is forcing Wal-Mart stores to use Visa’s routing pathway, which in most cases is more expensive than transactions using personal identification numbers, or PINs, and potentially less secure from fraud.
In a statement, officials at the Bentonville, Ark.-based Wal-Mart said the suit was about protecting customers’ bank accounts. “We have long advocated for PIN verification as opposed to the less secure signature verification for debit transactions,” Wal-Mart officials said. “PIN is the only truly secure form of cardholder verification in the marketplace today, and it offers superior security to our customers.”
In the statement, Wal-Mart said customers understand PIN verification because it’s required to access their funds at ATM machines, and PIN debit is the most common form of payment used in its stores.
“And Visa has acknowledged in many other countries that chip-and-PIN offers greater security,” Wal-Mart officials said. “Visa nevertheless has demanded that we allow fraud-prone signature verification for debit transactions in our U.S. stores because Visa stands to make more money processing those transactions. We believe Visa’s position creates unacceptable risk to customers and its actions and rules are inconsistent with federal law.”
Visa did not comment by press time.
Many in the c-store industry have pushed for chip-and-PIN requirements for years. “It’s absurd that Visa needs to be sued to protect consumers,” Gray Taylor, executive director, Conexxus, Alexandria, Va., told CSP Daily News. “I’m glad Wal-Mart took leadership on this.”
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