The Price of Silence and What About that Business Case?

As you may recall from the previous post, Visa and MasterCard on July 30 made a joint announcement of their intention to co-license their PIN debit routing application technology.

 So what’s happened since then? The answer is more like what hasn’t happened. Two weeks of meetings of the Debit Working Group of the EMVMigration Forum were canceled since the Brands made their big announcement.  Coincidence?  Something more nefarious?  Something in between? 

The next working group meeting is scheduled for Tuesday, August 20. So far this meeting is still on track.

Part of the industry silence that has greeted the Brands’ co-licensing announcement may be technical. The entity proposed to manage a common application ID among the Pin Debit Networks, dubbed CommonCo, is not yet up and running. The timetable for that is late September.  That has left a void with no one to speak to the Brands’ joint release on behalf of the PIN debit networks.

The issuers have to be thinking about this.

In the meantime, while the reaction to the Brands’ co-licensing agreement has been muted, there has been plenty of talk about the business case for EMV.  We posted about this several weeks ago.

American Airlines went on the record at a recent EMV Migration Forum meeting to explain why it doesn’t see a need to move to EMV.  According to American, most of its sales are online in an e-commerce setting.  This means they could potentially be exposed to card-not-present (CNP) fraud.  But they’re not even worried about that.

 Indeed, at the CNP Working Committee meeting held earlier this month there was a good deal of talk about how to prevent CNP fraud from escalating once we move the physical POS to EMV. But American expressed some doubt whether they’d have any increase in CNP fraud.

Why?  Because someone buying an airline ticket can’t even get past security to board a flight unless the TSA knows who they are.  And the TSA has nothing to do with EMV.  Indeed, why do any of the airlines need to worry about the liability-shift dates when their customers are forced by the federal government to disclose who they are before they can buy anything or get past security to board a flight?  Answer: They don’t.

Nevertheless, airlines serve people from all over the world and currently the airline countertop infrastructure can only handle mag-stripe transactions. So the airlines will likely make this shift just to ensure worldwide interoperability for payment technology.  (In point of fact, Citibank offers an American Advantage EMV-compliant card for its global travelers.)

Passenger air travel is a high volume, low margin business. It's easy to see EMV as a non-essential expense the airlines will take on reluctantly. We have to wonder how many companies in other merchant categories think the same way.

And whither the Debit Working Committee? We’ll update you next post.