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Chip Card Confusion Could Challenge Chains’ POS Plans
Chip transactions are processed differently in different parts of the world. For example, in Europe most transactions are offline, relying on the combination of the chip and the cardholder’s PIN. In the U.S. all transactions are processed online, positively authorized by the issuer, and then finalized when the cardholder signs a receipt.
Visa sees no change in the U.S. model, so it tells its acquirers to “configure EMV chip terminals to support online options only.” It is tough to argue with Visa’s logic: What issuer—or merchant—would not want to know if the cardholder had funds available? In situations where a merchant loses communications and cannot be online, the merchant is to batch transactions and submit them to the acquirer once the connection is back online. PIN verification remains optional, with no change to the requirement that if a merchant processes PIN-based transactions, it must use a PIN entry device that is PCI PIN Transaction Security (PCI PTS) compliant.
If there is a downside in Visa’s bulletin it is its recommendations to issuers. Specifically, Visa recommends that U.S. chip cards be issued to “support online authorization only” and not to support offline Chip-and-PIN. On a personal note, I understand Visa’s justification, i.e., providing issuers with better fraud detection and risk management. However the result is that U.S. cardholders like me still won’t be any better off when traveling outside the U.S.
For example, without offline Chip-and-PIN I will have a shiny new chip card, but I’m not sure it will be any more useful than my archaic magstripe card when I try and buy a train ticket in Germany, rent a bicycle in Paris or pay a toll on the Autostrada. (Note: I have the personal experience of failing at each of these, to the chagrin of those waiting—and in the last case, honking their horns—behind me.) Visa reports more positively in its blog on one executive’s experience of using a U.S.-issued chip card in London:
“Making purchases was quick and simple. The main difference was that instead of swiping my card, I inserted it in the terminal. Then I simply signed for my purchase, just as I normally would in the U.S.”
So I guess this means even my U.S. chip card will continue to require manual procedures on both the merchant’s part and my part when I travel outside of my home market.
What do you think? Are you ready for the U.S. move to chip cards? I’d like to hear your thoughts. Either leave a comment or E-mail me.