Merchant A and Merchant B Explain the Dilemma of EMV

The latest act in the Kabuki drama over exactly how to implement EMV in the U.S. has dragged on since October 2012. That’s when the Secure Remote Payment Council framed the issue that was on everyone’s mind: How to implement EMV in an equitable manner.

Five months later ten of the Pin Debit Networks followed up by adopting a common U.S. Debit Application Identifier, or AID.  Then nothing.

But just like an auction where no bids get placed till the clock ticks down to the final seconds, this week saw a flurry of activity as the prime-time players in the U.S. EMV implementation drama finally started getting down to formal proposals as implementation deadlines approach.

The first player to move was the SRPc. It proposed to the Big Brands, Visa and MasterCard, to begin discussions with SRPc and its Chip and PIN Working Group on an AID solution that points to an application that is owned and governed by all parties. For a discussion on the AID issue, scroll down to the prior post.

The SRPc proposal gets to the crux of the debate: Who will own the technology that will be used to route transactions in an EMV environment?

Understanding what AIDs are, the difference between AIDs and applications, and why this all makes such a difference may be hard to figure out. But to its credit, SRPc used a simple, but elegant, analogy to explain why the AID issue is hanging up this debate.  

Use of any proprietary AID, according to the SRPc analogy, is like walking through the door of Merchant A to buy something from Merchant B. That is, if the Pin Debit Networks buy into the use of any proprietary AID developed by Visa or MasterCard, they would subordinate themselves to that brand. 

The PDNs, working through their membership in the SRPc and their participation in the PIN and Chip workgroup, are essentially imploring the brands to work with them to create or enter into a compromise that would ensure the licenses used in permitting use of the underlying technology/application, whatever it is, turns out to be something they own in perpetuity.  In turn, this would create an equal and level playing field with fear of reprisal from any ‘owner’ of the technology ‘down the road when the licenses begin to expire.’

How did the Brands react? Visa seemed to take exception to the proposal. MasterCard’s response was, well, no response at all.  

The SPRc’s proposal is something that potentially removes a barrier from the discussions regarding the adoption of a Common U.S. Debit AID. It appears an equitable starting point in the final act of this drama. The next move belongs to the Brands.