Risk & Compliance

Home Depot Joins Battle Over Chip Card Security

The retailer says in an antitrust suit that Visa and MasterCard are trying to block the use of PINs to verify chip-card transactions.
Matthew HellerJune 16, 2016

Home Depot has opened a new front in an escalating battle between retailers and credit card issuers over chip-based payment cards, accusing Visa and MasterCard of putting profits ahead of consumer security.

The credit card giants and their member banks, Home Depot said in an antitrust lawsuit filed earlier this week, have “acted in concert” to prevent the adoption of chip-and-PIN authentication in the U.S. on a large scale even though it “provides far greater security” than signature authentication.

As a result, U.S. consumers “experience the highest rates of payment card fraud in the world, and United States businesses are subject to the highest payment card related fees in the world,” the suit alleges.

Home Depot was one of the first national retailers to upgrade its store terminals to accept the new chip-based cards for debit transactions. According to its suit, Visa and MasterCard have tried to block the use of PINs because less secure transactions earn them higher “interchange” fees from retailers.

Chip-and-PIN authentication “is less profitable for Visa, MasterCard, and their member banks and it provides a greater threat to their market dominance,” Home Depot claims.

The case comes a month after Wal-Mart sued Visa for the right to choose how customers authorize debit-card purchases, saying Visa’s requirement that shoppers be allowed to verify with a signature, rather than a PIN, encourages fraud.

Wal-Mart pays Visa about five cents more per signature transaction than it does for those that use a PIN, according to the Wall Street Journal.

Visa and MasterCard set an Oct. 1, 2015 deadline for banks and merchants to switch to chip cards and card readers similar to those long used in Europe. According to the Atlanta Journal Constitution, about half of the 1.2 billion credit and debit cards used in the U.S. have been switched to chip cards.

“The issuing banks … have little reason to resist Visa and MasterCard’s attempts to limit the use of PIN technology,” Home Depot said. “These banks profit from Visa and MasterCard’s market power by charging supracompetitive interchange fees on signature transactions.”

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