The EMV sideshow: Heavy on Politics, Light On Facts
The best way to deal with an argument you can’t win is to start another argument. Not only on the merchants have t some great lawyers, and great lobbyists but they know how to frame an argument better than any industry I have watched.
The latest example of their talent for changing the subject comes in the form of a joint letter signed by nine Attorneys General including Eric T. Schneiderman of New York and Lisa Madigan of Illinois. In the letter they urge the country’s largest banks to expedite chip-and-pin technology . They explain that implementation of such technology is “imperative” to protect consumers and that as the largest issuers these banks share a responsibility for a safer system. (http://www.ct.gov/ag/lib/ag/press_releases/2015/20151116_chipandpinmultistateletter.pdf)
(Remember that Visa and MasterCard have shifted liability for Point-of-Sale fraud onto merchants who can’t process chip based transactions for customers who have been provided with chip cards. But they don’t require consumers to punch in a PIN code to complete the transaction. A signature is good enough.)
First the politics: AG stands for Aspiring Governor. This letter is the latest example of how supporting merchants has been conflated with supporting consumers. There are plenty of legitimate criticisms of the Mega-Banks but lax security is not one of them. Conversely, merchants get away with acting as if every retailer in the country owns a hometown bodega and is eking out a living as it gets nickel-and-dimed to death by banks. Never mind the fact that major retailers like Target have waited decades to implement chip based card technology and that their indifference has resulted in consumers losing millions of dollars.
Unfortunately this blame the financial institution strategy is working beautifully. Instead of criticizing merchants for refusing to adopt chip based technology despite being given several years of lead time policy makers are debating the merits of signatures Versus PiIN.
Now for the policy. In fairness to the merchants, most countries mandate chip- and-PIN not a signature, The problem is that there is little evidence that this really makes transactions substantially safer from fraud in the medium to long term . As Julie Conroy, a fraud analyst, recently explained in an interview with Brian Krebs of the KrebsOn Security website when Great Britain adopted Chip and Pin PIN there was a dip in Fraud but criminals quickly adjusted. “The increased focus on capturing the PIN gives them more opportunity, because if they do figure out ways to compromise that PIN, then they can perpetrate ATM fraud and get more bang for their buck.” A PiN is a static piece of information that can and will be stolen. (http://krebsonsecurity.com/2014/10/chip-pin-vs-chip-signature/)
Once again merchants are packaging their financial self interest in the guise of consumer protection. First there was the swipe fee and now there is the evil card issuer not doing all it can to protect the consumer. Why does government feel the need to pick sides in what is not a dispute about safety but a dispute about money?
This argument is also unfortunate because both sides know that we are debating the merits of chip based technology that is already more than two decades old. I have no doubt that by the time the debate gets settled criminals will have largely made it obsolete and consumers won’t be any safer.