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Déjà vu in card land

EMV: PIN or signature debit? Not again!

Obvious and mediocre won’t be found here—but “Why didn’t I think of that?” will! Challenging the banking status quo is Dan Fisher’s personal mission. Obvious and mediocre won’t be found here—but “Why didn’t I think of that?” will! Challenging the banking status quo is Dan Fisher’s personal mission.

Here we go again …

Merchants are attacking the card brands again about the right to choose between PIN and signature. They are creating quite a kerfuffle.

The issue has to do with the Durbin amendment to the Dodd-Frank Act and the right of merchants to have the choice when switching pinned transactions.

• Merchants want to drive consumers to use their PIN option—it’s less expensive to process.

• Financial institutions want to drive consumers to use the signature debit option—it generates more revenue.

The choice of signature debit or pinned debit as the type of transaction is not addressed in Dodd-Frank, only the merchants’ right to switch pinned transactions through a less-expensive processing route.

Consequently, when consumers at the point of sale select the signature debit preference as they use their new EMV card—as occurs in the case of most community banks and credit unions—this drives the transactions to the higher revenue source and merchants are frustrated.

Legally speaking …

The question then presents itself: Can merchants establish a rule to only accept PIN debit transactions? Or at least require consumers and businesses to use the pinned debit option at their store?

• Under Visa and MasterCard rules: No!

• Under Dodd-Frank: No!

What will happen next? 

We most certainly will see more lawsuits and the card companies will fight them aggressively. Why? The reason is that the card companies and EFT processors are complying with the Durbin amendment. The intent of the law was to give merchants a choice in switching pinned transactions—not to require consumers and businesses to select pinned transaction option only.

Will Congress step in (again)?

I suspect that Visa and MasterCard will win this round. However, we may see more proposed legislation on this topic in the future. That’s pretty sure.

Will it pass? Maybe.

We may see the interchange cap population lowered from the $10 billion asset threshold to $5 billion in the next Congress as a concession. On the other hand, but I do not see the requirement to select pinned transactions being implemented.

At least that is my opinion. It is a matter of choice.

And in spite of the hurricanes ripping through so many areas of American life this election, I do not see the political winds in this area being strong enough to take away the choice!

—The Wombat!

Dan Fisher

Dan Fisher is president and CEO of The Copper River Group, a consulting firm headquartered in Fargo, N. D., that focuses on technology and payment systems research and consulting for community financial institutions. For nearly 30 years, Fisher has worked in the financial industry using technology to improve the bottom line. He was CIO of Community First Bankshares (now part of Bank of the West), has served as a director of the Federal Reserve Board of Minneapolis, the chairman of the American Bankers Association Payment Systems Committee, and was a member of the Independent Community Bankers of America Payments Committee. Fisher has written numerous articles on banking technology and the payments system. He has authored or co-authored six books and recently published a book titled, "Capturing Your Customer! The New Technology of Remote Deposit." You can contact Fisher at [email protected] or at 701-293-6222.
P.S. To understand Dan's nickname, check out "About the Wombat" on his website.       

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