Processor Execs Echo Merchant Sentiment in Favor of PINs for Chip Cards

Some of the nation’s biggest merchants have been adamant for months that they prefer EMV payments with PINs, not signatures, and on Thursday they were joined in that sentiment by a panel of representatives from some of the country’s largest processors.

In the face of tepid support, at best, for PIN authentication from the two largest card networks, the processor representatives made it clear they support their client merchants in calling for PINs to be associated with chip cards by the time EMV technology arrives in the United States. A critical deadline, April 2013, looms by which all U.S. acquirers and sub-processors must be prepared to handle the extra data called for under the EMV protocol. “PIN is absolutely the best method we have today for two-factor [authentication] that causes the least amount of disruption [at the point of sale],” said Rob McMillon, vice president for global security at Atlanta-based Elavon, the processing arm of U.S. Bancorp.

McMillon was part of a four-person panel of processing executives speaking at the Merchant Advisory Group Mid-Year conference in Atlanta. The Minneapolis-based MAG is a trade group whose membership includes payments executives from more than 50 of the country’s biggest retail chains. Other members of the panel joined McMillon in endorsing PINs for chip card transactions. Patty Walters, senior vice president of merchant products and security at Cincinnati-based processor Vantiv, told the audience they may have more clout than they think. “There’s a very good possibility [issuers] will do exactly what you tell them to do” on chip-and-PIN, she said, adding that PINs offer “much better [return on investment]” for merchants than signatures.

While sketching out plans for the introduction of EMV in the United States, the card networks have stopped short of full-throated support for the chip-and-PIN variety of the payment technology used in overseas rollouts. Visa has expressed support for dynamic authentication, a technology that generates unique encrypted identifiers with each transaction. MasterCard has proposed liability rules that appear to favor chip-and-PIN, but cautious executives at the MAG meeting said they were waiting for fuller details.

Several chip card programs introduced by major banks over the past year for customers who travel overseas have featured signature rather than PIN authentication, leading to frustration among at least some merchants that are re-gearing their point-of-sale systems for the new technology in expectation of PINs. “What we know today is that PIN is the best verification we have, and signature is not,” said Dee O’Malley, director of financial services at Best Buy, the electronics-store chain. O’Malley moderated the processor panel.

Some members of the audience echoed that frustration during the question-and-answer time. One executive expressed the fear that signature authentication might continue in place of PINs for a number of years to come while the marketplace adjusts to mobile payments, which over time could replace card transactions and offer more sophisticated authentication methods. “Why would we leave the worst verification method in place for another five years while we wait for something else?” asked one audience member.

Overall, the processing panelists said their organizations will be ready to support EMV by April of next year but expressed hesitation about whether other equipment and service providers will meet the deadline, which was set by Visa in an EMV policy statement released last summer. Besides Walters and McMillon, the panel also included Bruce Dragt, senior vice president of payment systems at First Data Corp., and Jimmy Scarborough, senior vice president of business development at Bank of America Merchant Services (BAMS).