Sen. Durbin Suggests That the Big Networks Have Too Much Power Over Chip Cards

U.S. Sen. Richard Durbin, author of 2010’s controversial Durbin Amendment, wants to know about the inner workings of EMVCo, the chip card standards body owned by the six largest global payment card networks. A statement Thursday from the Illinois Democrat says Durbin is “seeking information on whether the deployment of this technology in the United States is adequately preserving competition and protecting consumers.”

Durbin listed 10 questions related to EMVCo itself and the U.S. chip card initiative in a letter addressed to Mike Matan, an American Express executive who is chairman of EMVCo, the standards body owned by Visa, MasterCard, Discover, AmEx, China-based UnionPay and Japan-based JCB.

In a Friday email to Digital Transactions News, an EMVCo spokesperson said the company “is unable to provide comment at this time.”

Thursday’s letter suggests that the big networks have all the power over chip cards. Durbin says EMVCo is managed by a board of managers and an executive committee, “both of which appear to consist entirely of representatives from the six giant networks.” He asks how those managers and committee members are selected.

“EMVCo does not appear to provide other U.S. stakeholders in the electronic payment system with any meaningful decision-making authority in the development of its specifications or certification processes,” the letter says. “Smaller payment networks and those who accept electronic payments (such as merchants) are relegated to ‘associate’ status in EMVCo, which appears to be purely advisory in nature. Please explain why these stakeholders are unrepresented on EMVCo’s executive committee and board of managers.”

Durbin’s amendment to 2010’s Dodd-Frank Act imposed price controls on large financial institutions’ debit card interchange. The measure also instituted routing requirements meant to ensure that merchants had a choice in sending debit transactions to at least two unaffiliated networks. Visa’s PIN-debit traffic took a huge hit in the immediate aftermath, while MasterCard and some of the PIN-debit networks saw gains.

The letter comes in the wake of the card networks’ EMV liability shifts in the U.S. last Oct. 1. The shifts assigned financial responsibility for counterfeit point-of-sale transactions to the party, merchant or issuer, that didn’t support EMV in a transaction.

Now that the liability shift has taken place, Durbin wants to know whether smaller networks have assurances that EMVCo’s specs “will not have the effect of steering consumers or card acceptors away from small networks and toward EMVCo’s six member organizations?” His letter also asks if EMVCo has pre- and post-Oct. 1 transaction data and market-share information.

Durbin further asks about how many U.S. EMV cards are enabled for PIN authentication. While chip debit cards are being issued with PINs just like their magnetic-stripe predecessors, many U.S. merchants want so-called chip-and-PIN authentication with EMV credit cards. Most credit issuers reject that stance, and the networks haven’t been enthusiastic.

The letter further asks if EMVCo has plans to add biometric authentication. Durbin asked EMVCo to respond within 30 days.