Kroger Sues Visa Over Signature vs. PIN in Debit Transactions

The lawsuit is just the latest in a series of lawsuits that large merchants have filed against credit card companies over restrictions on PIN authentication. NATSO continues to actively urge members of Congress to examine the payments system, arguing that PIN authentication is the most secure, cost-effective solution.

Grocery store chain Kroger has filed a lawsuit against Visa alleging that the credit card company has levied fines against it and threatened to raise fees and cut off its acceptance of debit cards if the company doesn't permit customers to verify purchases with signature instead of PIN. Kroger alleges that Visa informed the retailer that the configuration of its new terminals didn't comply with Visa's rules, which require merchants to allow customers to choose between PIN and signature.

The lawsuit comes not long after Wal-Mart sued Visa alleging the credit card company is forcing the retailer to use a signature network for routing debit transactions. More recently, Home Depot sued MasterCard and Visa alleging violations of U.S. antitrust laws by colluding to prevent the adoption of chip-based cards that require customers to enter a PIN to authorize a transaction.

The fundamental problem at the core of all of these lawsuits is that the Visa and MasterCard make more money on signature transactions than they do on PIN transactions. "This issue should be all about which payment method is the most secure and least prone to fraud," said David Fialkov, NATSO's vice president of Government Relations. "Clearly PIN authentication is the most secure. But for Visa and MasterCard, implementing the most secure payment infrastructure falls a distant second to maximizing their profits, no matter how much they hurt consumers and retailers."

When Congress passed the Durbin Amendment, it injected competition into PIN routing transactions. It gave merchants more than one option for processing PIN debit transactions, and this competitive environment drove down costs.

Merchants still have no choice in routing signature debit transactions, however. Because Visa issuing banks only issue Visa debit cards that are enabled to function with Visa's VisaNet network for processing signature debit transactions, merchants have no ability to route signature debit transactions on Visa debit cards to third party networks.

"There's no competition," Fialkov said. "They can charge astronomically high rates without fear of being undercut by a competitor. It's no wonder that they want to push retailers toward signature authentication, even though this is far less secure."

NATSO is actively educating members of Congress on this unfortunate scenario, and arguing that PIN authentication is the best solution. NATSO is also pushing back against efforts to repeal the Durbin Amendment.

Tiffany Wlazlowski Neuman's photo

Tiffany Wlazlowski Neuman

Tiffany Wlazlowski Neuman develops and executes communications strategies to advance NATSO’s public relations and advocacy goals. Tiffany also develops and oversees partnerships related to the NATSO Foundation’s public outreach initiatives. Tiffany lives in the D.C. metro area with her husband and their two sons.More
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