The longstanding debate between merchants and the credit card companies over using PINs with EMV chip cards should not even be a debate in my opinion. PINs most assuredly provide more security for card use (and 70% less fraud than signature cards) and consumers comfortably use them for ATM and other debit transactions.
Many banks and card companies argue that attaching PINs to credit cards will be confusing for consumers and will create a customer service headache for card issuers who will have to constantly help consumers reset credit card PINs. This argument is a non-starter.
Financial services industry veterans I have spoken with tell me the main reason the credit card industry doesn’t want to support PINs with EMV credit chip cards is that it will cost the payment system participants too much money to rewire their systems to accept PINs on credit transactions.
Apple Pay’s new loyalty program feature however proves that when there is a will to rewire payment terminals, there’s a way. Apple Pay is getting ready to roll out its integrated payment and loyalty rewards and store cards program features with Walgreens and Kohls this Fall. These features were first announced last June and the company appears to be on schedule.
The Apple Pay user interface promises to be pretty slick since users taking advantage of loyalty program discounts need only tap their phone on the terminals to communicate their loyalty program information and then, depending on the customized experience each merchant designs, perhaps tap again to initiate the payment after any loyalty discounts are applied.
Consumers don’t even need to open any mobile app or any part of an app in order for the retailer’s terminal to find the right loyalty program information. Apple Pay can execute on this interface because the terminal manufacturers or payment acquirers used by these retailers update the software in the terminal to perform this function in a handshake with Apple Pay on the user’s device.
If Apple can get this update working, I don’t see why payment acquirers, processors and issuers can’t add PIN acceptance to EMV credit card transactions. Only reason I can think of is that they don’t put security first and they’d rather not spend the time and money rewiring their systems.
Even Federal Reserve Governor Jerome Powell seems to see the need for Chip and PIN rather Chip and Signature cards. Earlier this summer, the Governor publicly questioned the use of chip and signature in the U.S. rather than chip and PIN which banks overseas have been issuing for years. He asked the financial services industry to “continue assessing the use of signatures as a means of authenticating card transactions.”
The credit card industry needs to play fair and listen to voices of reason when it comes to chip and PIN. Apple Pay proves point-of-sale payment systems can accept new fields with relative ease. PINs should be one of them.
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