Following Star, Accel, and Pulse, NYCE Selects Visa’s EMV Debit Technology

Debit network NYCE says it will use Visa Inc.’s common application identifier technology on chip debit cards, marking yet another regional debit network’s acceptance of a critical component to enabling Europay-MasterCard-Visa chip card acceptance in the United States.

This is NYCE’s first formal EMV license, says Fidelity National Information Services Inc. (FIS), the Jacksonville, Fla.-based owner of the network.

“NYCE has been working with many players in the U.S. industry to determine a business model that allows EMV technology to function in the U.S. market without impeding the business interests of any party in that market,” Bob Woodbury, senior vice president and general manager of FIS Payments Networks, says in an email. “NYCE was able to come to an agreement with Visa that allowed their EMV technology to be deployed for joint NYCE-Visa clients while preserving the business interests of all parties.”

This ensures that NYCE will have access to Visa EMV technology in perpetuity to support NYCE clients and NYCE will be able to support transactions using all authentication types, the company says.

Last week processor Fiserv Inc. said its Accel debit network would support Visa’s AID as well as MasterCard Inc.’s. Pulse, the debit network owned by Discover Financial Services, licensed Visa’s AID. In February, First Data Corp. said its Star network would license Visa’s EMV debit AID.

Chip debit cards in the U.S. are anything but a simple proposition because of the Durbin Amendment in 2010’s Dodd-Frank Act. The Federal Reserve’s rule implementing the amendment requires that merchants have a choice of at least two unrelated networks on which to process each debit card transaction. Such routing choice is fairly easy to implement on magnetic-stripe cards but not so on the EMV chip cards that eventually will replace them.

NYCE’s use of Visa’s technology answers the question of how merchants could route EMV debit transactions in compliance with the amendment, Woodbury says. “We believe this solution completely solves this question, at least when the merchant is accepting a card that participates in NYCE and Visa,” he says. “Since we have agreed to use the same technology on the card and in the terminal, we have removed the barriers that had created the question. As more networks, and eventually all networks, solidify around the same solution on any specific card, the question of routing an EMV debit card in compliance with the Durbin Amendment will be eliminated for that card.”

Just last week, a federal appeals court upheld the Fed’s implementation of the Durbin Amendment, a factor that did not influence NYCE’s decision, Woodbury says. “The search for a U.S. EMV solution from both a technical and business perspective is over two years old,” he says. “The interests of all the participants in the U.S. payments industry, interests both today and in the future, were being considered. We believe the agreement allows both NYCE and Visa and their respective participants to move forward with an EMV solution that is not subject to change based on the ultimate outcome of this court action.”

Analyst Jane Cloninger, a partner with San Francisco-based payments consultancy Edgar Dunn & Co., doubts the court’s decision, or the potential for one earlier this year, was a factor in any of the announced debit network actions. “The Star and Accel deals were announced close to that [court ruling],” Cloninger says. Those negotiations had to be well under way prior to then, she says.

Until recently, 10 networks that formed the Debit Network Alliance to support their own common AID opposed the national-brand networks’ solutions, arguing they did not offer equal governance. That support is being displaced, but it is not to the detriment of the DNA, says Paul Tomasofsky, executive director of the DNA as well as of a separate group called the Secure Remote Payments Council.

“It’s positive for the industry,” Tomasofsky says. “It continues a trend we’re seeing where we’re getting a common solution that allows networks to participate on a level playing ground with the right competitive conditions.”

Debit networks may have surmised that creating a common AID from scratch will take time and money, Cloninger says. “The problem is it takes a long time to set up and get the infrastructure and government requirements in place,” she says. Deals with the existing card brands allow the debit networks to move ahead while meeting the requirements of the Durbin Amendment and merchants, she says.

Cloninger expects those debit networks not already disclosing their support of the Visa or MasterCard’s AID may soon do so.