Pub. 5 2017 Issue 4

www.uba.org 10 Best Practices for Enhancing the Debit Chip-Card Experience Complexity of U.S. Rollout has Created Inconsistencies at the Point of Sale By Bryan Manka, Senior Product Manager, Emerging Technologies, PULSE Network I n October 2015, a fraud liability shift was introduced to the party that has not adopted EMV chip technology. This shift prompted a transition to chip-enabled credit and debit cards and POS terminals. As of January 2017, an estimated 90 percent of U.S. debit cards were chip-based, according to the 2017 Debit Issuer Study, commissioned by PULSE and conducted by Oliver Wyman. While many major merchants were early adopters of the technology, smaller retailers have been slower to make the transition. The gradual transition to chip-based transactions, combined with the requirements of Regulation II implementing the Durbin Amendment and changes in cardholder verification method (CVM), have created a chip card acceptance landscape in the U.S. that varies widely from card to card, and from mer- chant to merchant. In many instances, debit transactions are approved as consum- ers would normally expect. In other cases, cardholders may be asked to sign in a merchant environment where they would normally use their PIN, eliminating the option to receive cash back. In rare instances, the transaction may fail and the con- sumer will have to use another payment option. They also may be asked to choose between a global network brand and “U.S. debit” when completing chip-card transactions. To understand what banks can do to help their customers cope with this disparity of experiences, it’s important to first under- stand the factors that contribute to it. Layers of Complexity There are several layers of complexity involved in the U.S. tran- sition to chip cards: • Regulation II – Among other things, this regulation requires financial institutions to enable at least two unaffiliated net- works on each debit card and enables merchants to determine routing priority among the enabled networks. U.S. chip debit cards must have at least two application identifiers (AIDs) to be compliant, and to facilitate merchant routing choice: a global AID from the payment brand on the card (Discover, Mastercard or Visa) and a U.S. Common Debit AID. The com- mon AID enables routing to any of the supported brands on the card, including unaffiliated debit networks. • Card Network Combinations – U.S. debit cards have one of three primary card brands and at least one un- affiliated debit network (but often two or three). This means cards can have dozens of possible combinations of enabled networks. • Enablement Order – Because most banks enabled their credit cards with chips before their debit cards, merchants made a similar choice, enabling their terminals first for chip-based credit transactions. This means they enabled the global AIDs before U.S. Common Debit AIDs, and signature authorization before PIN authorization, in many cases. Many chip-accepting merchants still have not enabled the common AIDs. Depending on where each merchant is in the implementation process, the result is a wide variety of cardholder experiences. • CVM Options – Many debit networks now support PIN- less POS transactions – and in the case of PULSE, even signature transactions. This blurs the lines between PIN and signature debit and has added another layer of uncer- tainty to the cardholder experience with chip cards. • Terminal Configurations – Merchants and their acquir- ers make a number of choices when configuring payment terminals. These include preferences for AID selection and PIN, signature or PINless verification preference. • Network Routing Choice – Acquirers make routing decisions based on the transaction information cap- tured by the terminal.