Walmart has filed a lawsuit against Visa for allegedly forcing the mega-retailer to let customers use signatures, rather than personal identification numbers (PINs), when paying for purchases with chip-enabled debit cards.
As I discussed in an article last year, by requiring people to authenticate with a PIN any time that they make a transaction, merchants dramatically reduce the ability of crooks to use stolen cards. While most of the Western World has been using so called "chip-and-pin" authentication with both debit and credit card for years, the US market has been way behind: in most cases, chip-enabled cards were first distributed to account holders only within the last year, and, in the case of credit cards, the PIN-authentication feature isn't even available yet.
In 2015, however, Walmart began requiring PINs when people paid for purchases with chip-enabled debit cards (but, not credit cards), and began to refuse to accept the cards as methods of payment if a customer could not successfully enter his or her PIN. Visa, however, demanded that the retailer change its practice and allow for signatures in lieu of PINs, citing various contractual terms in place with Walmart.
The retail giant is fighting back - claiming that by forcing it to accept signatures in lieu of PINs, Visa is creating an unnecessary risk of fraud. In a statement issued yesterday, Walmart stated that "PIN is the only truly secure form of cardholder verification in the marketplace today, and it offers superior security to our customers... Visa has acknowledged in many other countries that Chip and PIN offers greater security. 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." According to a statement by Wal-Mart, the lawsuit "is about protecting our customers' bank accounts when they use their debit cards at Wal-Mart."
According to the Wall Street Journal, the issue is not just about security, but, as the aforementioned quote from Walmart implies, also about money: the paper claims that Wamart pays Visa about five cents more per signature transaction than it does for those that use a PIN. Also, according to the lawsuit, debit cards are the most frequently used form of payment at Walmart, and account for more than 70% of the dollar value of card-based payments -- so the five cents extra per payment translates to a huge amount of money over time.
The Walmart-Visa lawsuit may help raise awareness to the fact that payment card security in the United States is severely lacking: while the lawsuit centers around debit card payments, hopefully it will indirectly motivate Visa and other credit card companies to accelerate the general deployment of chip-and-PIN within the United States.