MAG Encourages Focus on Comprehensive Solution for Payment Fraud

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The Merchant Advisory Group (MAG) has released the following press release in response to the growing concerns about payment card security in the wake of recent data breaches.

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More than a year ago, the prominent payment card networks released their U.S. EMV roadmaps. During the intervening months, the roadmaps have been criticized as both too aggressive and too lax. Mixed messages have accompanied the releases. One of the networks has made public statements that payment card fraud is at an all-time low, which begs the question: Why are banks and merchants being asked to spend an estimated 8 billion dollars1 on the implementation of EMV?

In the wake of the sensational reporting surrounding a recent data breaches, one of the networks has reasserted its EMV roadmap, including the dates for shifting liability for counterfeit fraud to merchants that do not spend scarce resources, to convert to EMV. Their plans are lent credibility by a chorus of self-proclaimed experts who all stand to profit from the EMV conversion.

Does EMV help to prevent fraud? Absolutely.
Should the United States be working to move from magnetic stripe to chip-based smart cards? No question.
Unfortunately, the networks’ EMV roadmaps will steer us down a road littered with potholes.

Merchants are painfully aware of the costs of breaches of payment card data as well as the costs of complying with the unilateral PCI “standards” imposed upon merchants by the networks. Unfortunately, these are the consequences of merchants accepting the networks’ outdated and fraud prone payment card products. Merchants welcome the opportunity to do something about the problem and are willing to make the sizeable investments necessary to protect the payments ecosystem from the deficiencies inherent in today’s payment cards.

Migration to EMV can significantly reduce the inefficiencies inherent in today’s payments system, but it will only succeed in delivering on its promise if the industry as a whole can address all of the known deficiencies. In the meantime, the networks should immediately enable PIN security on all cards in the marketplace and require PIN entry on every purchase for which a CVM is required. Visa and MasterCard have publicly stated that PIN is “one of the most effective ways of combating fraud”, but they have not enabled the use of PIN on credit cards in the United States. They should do so immediately.

Merchants insist that the networks take steps to reformulate their EMV roadmaps to address all of the known deficiencies, not just those most easily remedied by merchant investment alone.
These steps include the following:

  •     Eventual elimination of outdated and fraud-prone magnetic stripe technology.
  •     Elimination of signature as a Cardholder Verification Method (CVM).
  •     Requirement for PIN on all transactions for which a CVM is necessary.
  •     Full encryption by all parties (merchants, networks and issuers) of cardholder data and tokenization of cardholder data.
  •     Modification of EMV standards to comply with U.S. debit regulations.

Lastly, control over payment card standards – including EMV – must not belong to any one party or cadre. The payments business continues to be one fraught with litigation and controversy. Exclusive ownership of payment standards by a narrow subset of stakeholders is likely to result in abuse of market power over other stakeholders, to the detriment of consumers, merchants and issuers. We submit that a respected open standards organization such as ANSI X9 would best fulfill this requirement.

Merchants remain dedicated to investing in a realistic plan to address payment card fraud. Merchants support transitioning the U.S. payments markets to the EMV standard so long as the plans for doing so address the needs of all stakeholders equitably. The MAG is ready and eager to participate in the process of developing a robust, comprehensive roadmap for the industry.

About The Merchant Advisory Group
The Merchant Advisory Group (MAG) is a cross-industry association of large merchants involved in the payments industry. The purpose of the MAG is to establish a collaborative relationship between all parties involved in the payments industry to drive positive change in payment acceptance. The MAG seeks partnership between merchants, acquirers, payment companies and banks in order to improve the payments process for everyone. The group also seeks to provide merchants and other companies the opportunity for networking, best practice sharing, and research.

1 Source: First Data White Paper:

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Mark Horwedel
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