Wal-Mart is suing Visa for allegedly forcing customers to use signatures on chip card transactions. The retail giant claims that Visa stands to make more money for requiring them to use signatures instead of PINs.
Wal-Mart filed a lawsuit in New York since Visa forced the retailer to require customers to use signatures when paying using their chip-based debit cards. Visa would not allow Wal-Mart to use the standard "chip-and-PIN" protocol, according to NBC News.
A spokesperson of the retail giant said that the suit is about protecting their customers' bank accounts during debit card transactions. Wal-Mart is determined for a jury trial, according to the complaint found in the Wall Street Journal.
In a statement released by Wal-Mart on Tuesday, the retail giant claims that PIN is the only true and secure form of cardholder verification in the marketplace. It also provides superior security to Wal-Marts customers. The company also added that most of its customers already understand the need for PIN verification since PINs are required to access funds at ATM machines.
Signatures do little to protect customers from thieves using lost or stolen cards, according to Jeremy Gumbley from Creditcall. Wal-Mart argued that 91 percent of fraudulent debit card transactions are done with signatures. Despite acknowledging that Chip and PIN offer greater security in many other countries, VISA still demanded Wal-Mart to use signature verification for their debit transactions in the U.S.
The fraud-prone mode of payment allows VISA to make more money to process such transactions, according to the statement released by Wal-Mart. Wal-Mart pays 5 cents more to Visa for each signature transaction compared to PIN transactions. In-store payments that are authorized using signatures are routed across Visa's debit network, which generates higher fees, according to CNN.
Debit cards account for 70 percent of all card purchases at Wal-Mart. While the retail giant wants to require PINs for debit purchases, they are not requiring a PIN for credit card transactions.
Chip cards create unique codes for each transaction making it difficult for frauds to create fake cards. Many countries today require both chips and PIN codes to make purchases using a card. However, the U.S. still allows for signature purchases when using the chip cards, which made Wal-Mart quite critical to the new technology.
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