I can’t count the number of times I’ve had to clarify at the checkout when shopping, “chip or swipe?”
Ever since debit cards have come out with the chip, it’s been confusing. We’ve gotten into the habit of swiping, followed by inputting our PIN, and finishing off with a messy signature on the pad.
Now, the chip is causing more problems than just confusion. Wal-Mart is suing Visa for $5 billion because they feel the lack of safety that comes from using the chip is too risky for customers. Gone are the days of always punching in your PIN. With an easily forgeable signature being the only verification you need for using a chip, Wal-Mart said, it makes it more “fraud-prone.”
“This suit is about protecting our customers’ bank accounts when they use their debit cards at Wal-Mart,” a Wal-Mart spokesperson explained.
Now, let’s look at this in the more global scheme of things. The interesting thing about all of this is that Europe also has a chip system, but it uses chip-and-PIN opposed to the U.S. chip-and-signature. Canada also uses chip-and-PIN.
“Visa stands to make more money processing those transactions,” said Wal-Mart spokesperson Randy Hargrove as he explained the reason the U.S. uses a chip-and-signature system.
Hargrove said Visa has acknowledged that the chip-and-PIN offers more security, but Wal-Mart has demanded to allow the signature verification in their store anyway.
The Wall Street Journal reported that when a signature transaction is done, it costs Wal-Mart 5 cents more than if a PIN were used. That money is going to Visa. According to the lawsuit, card payments account for 70 percent of sales. As Wal-Mart’s court documents reveal, “As a result, Wal-Mart’s retail sales were below what they would have been otherwise.”
It will be interesting to see how this all plays out. If anything. it will raise awareness to the riskiness of chip-and-signatures and gather enough attention that Visa will need to take another look at its system.