Page 55 - Cyber Warnings - November 2015

A banking problem - not a merchant problem
There's a good reason why retailers aren't rushing to make the switch.

"These terminals aren't cheap," Matt Shulz, a senior analyst at CreditCards.com told International
Business Times. "They can cost between $200 [to] over $1,000. It's a big deal for these folks. You
can definitely see the point the smaller merchants have."

One security analyst put it simply:

"Merchants are being asked to incur significant costs and operational disruption to solve a banking
problem rather than a merchant problem," wrote Adrian Lane, chief technology officer at Securosis,
in a research paper cited by CSO Online.

Politics are also a factor
While most retailers seem indifferent, some politicians are reacting to the situation with anger. As
American Banker notes, in a recent Capitol Hill hearing on the EMV shift, one House member used
the opportunity to excoriate banks for the transaction fees burdening small businesses.

"If EMV successfully reduces fraud," Rep. Nydia Velazquez, D-N.Y., asked a payment industry
representative, "will Visa commit to reducing swipe fees on its cards commensurate with that fraud
reduction?"

Stephanie Ericksen's response? The Visa vice president, said the money saved needs to go back
into anti-fraud efforts.

Why not chip and PIN?
The reluctance of retailers to embrace chip readers isn't the only problem with the EMV shift. A
large number of critics argue the new rules don't go far enough.

That's because, for a complex set of reasons, the U.S. has decided to push the "chip and signature"
method instead of the more secure "chip and PIN" standard used throughout the rest of the
developed world.

The difference, for consumers, is that after they "dip" a payment card in a reader, they would enter
a personal identification number instead of an easily forgeable signature.

The implicit bet among U.S. retailers is that sales lost to the allegedly more cumbersome PIN
method would be more than the costs from the higher levels of fraud made possible by reliance on
"chip and signature."

That line of thinking holds no water, according to an analyst with Gartner Research.

"This argument that [signatures are] more convenient for consumers is … not a legitimate argument
if you look at the evidence with the consumer experience in Canada and other countries," Avivah
Litan told Wired Magazine. "The PIN has not been a barrier."

55 Cyber Warnings E-Magazine – November 2015 Edition
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