Debit Networks Offer EMV Compromise That Would Allow Visa, MasterCard Apps

A trade group representing most of the nation’s debit networks has agreed to allow EMV applications other than its own to work on chip cards in the United States. The new position taken by the Secure Remote Payment Council represents what the group calls a “major compromise” and opens the door for chip applications from Visa Inc. and MasterCard Inc., which the SRPc had previously barred.

The compromise could speed U.S. deployment of EMV, the Europay-MasterCard-Visa standard for chip cards, which has been adopted in most industrialized countries. But it comes at a cost to SRPc members. By not requiring its own chip solution, “we know we’re giving up a bunch of flexibility,” says Robert Woodbury, vice president of product solutions at NYCE Payments Network LLC, an SRPC member and a unit of Fidelity National Information Services Inc., Jacksonville, Fla.

The group, which represents retailers, processors, and financial institutions as well as electronic funds transfer networks, presented its compromise proposal Tuesday afternoon during a regularly scheduled meeting of the debit working group of the EMV Migration Forum, a cross-industry organization working on smoothing the way for EMV in the U.S. The working group represents banks, merchants, networks, and processors concerned with implementing EMV.

In its proposal, the SRPc pulls back on a requirement that a so-called common AID, or application identifier, used with chip card transactions operate only with the specific application adopted by the group. In March, the SRPc said it would use an application called D-PAS from Discover Financial Services. This means the debit networks, which had previously opposed chip applications from MasterCard and Visa, have now green lighted them.

“No issuer will be restricted from using an app as long as it’s approved by EMVCo.,” says Terry Dooley, senior vice president and chief information officer at the Johnston, Iowa-based Shazam network. EMVCo. is the company that administers the EMV specification.

At the same time, however, the proposal maintains the SRPc’s longstanding insistence that ownership of the common AID must be held equally by all networks, with each network having an equal share in governance. In the EMV specification, the AID is a string of digits that indicate a card’s network brand and type of card, for example, Visa debit. Applications run under the AID and control such functions as online and offline authorization and security.

This latest proposal from the SRPc comes on the heels of a breakthrough announced earlier this month in which the networks, including Visa and MasterCard, agreed to allow competing EMV solutions so long as only one resided on any given card for U.S. usage (technically, each card will carry two applications, since an extra one is necessary for overseas usage).

NYCE’s Woodbury credits that development with stimulating the SRPC’s willingness to allow applications like the Visa Smart Debit/Credit (VSDC) and M/Chip applications from Visa and MasterCard, respectively. “That was certainly the inception point,” he tells Digital Transactions News. “That was the beginning of thinking about things differently.”

Still, the SRPc’s proposed compromise remains only a proposal for now. Debit network officials say they have little indication of how Visa and MasterCard will react. “It will be, ‘We’ll take this in and get back to you,’” Woodbury said Tuesday morning.

For their part, neither of the two major payments networks had comment after the meeting specific to the debit networks’ proposal. “At this point, we do not have a clear understanding of the SRPc proposal and therefore cannot comment specifically,” said a MasterCard spokesperson by e-mail.

Spokespersons for both networks, however, referred to “productive” conversations the networks have had over past few months with various payments parties. “Since proposing our initial debit solution, we have continued active discussions with a number of debit networks about how our approach to a common solution for Visa cards can help the industry move forward,” said the Visa spokesperson in an e-mail message.

Even if the proposal wins acceptance, business terms must still be worked out. That process could be long and difficult. The payments industry has been struggling since early last year to make EMV conform with the Durbin Amendment’s mandate that merchants have a choice of networks on which to route debit transactions. This effort gave rise to a series of competing proposals from MasterCard, Visa, and the debit networks for a common AID. Reconciling those proposals has proven to be an elusive goal.

“It sure would be nice if it were easy, but the last 18 months haven’t been easy,” says Shazam’s Dooley.