Visa Changes Debit Debate, Backs Contactless

Visa changes the signature vs. PIN debit debate with policies to support contactless payments. 

In an interview in the June/July 2009 issue of Cards&Payments magazine, Ellen Richey, global head of enterprise risk for Visa, discussed the adoption of chip technology to make purchases more secure. Richey said “the U.S is not going to be adopting a chip-and-PIN credit card or debit card any time in the very near future” suggesting that in the U.S., the deployment of a contactless-chip card network may not include a PIN component.

In October 2009, Best Buy announced that it would discontinue it’s acceptance of Visa contactless payment cards. Why?  Best Buy reportedly took issue that Visa contactless lacked the option of PIN acceptance, while payment industry analyst pointed to the controversy of Visa allegedly pushing signature-based transactions over PIN transactions in an effort to generate higher Interchange fees.

In an interesting twist, Visa announced that signature debit and Interlink PIN debit rates will both change starting April 2010 – they will be priced the same.  Additionally, Visa is set to expand its small ticket Interchange (on transactions <$15) as well as extend its No Signature Required (NSR) program (on transactions <$25) to most merchants. 

This certainly is an effective strategy for changing the debate on steering purchases to and from signature debit or PIN debit.  And if Visa’s strategy to deal with security and global interoperability issues is for the U.S. to adopt contactless-chip technology, then eliminating price differences between signature and PIN debit will also alleviate the need for contactless to have a PIN option (Best Buy’s concern).

Many were already predicting 2010 to be a breakout year for contactless payments (from contactless stickers to NFC enabled phones).  With these Visa developments, merchants may want to consider adding contactless card readers over PIN pads at their point of sale.

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