Where Are the Issuers on EMV?

Well, the Big Brands made their long awaited move.

Last week we talked about the Kabuki drama that is EMV implementation in the U.S. The Secure Remote Payment Council made the first move with a proposal that would ensure a role for PIN Debit Networks in the brave new world of EMV debit payments. We asked you “stay tuned.”  Recall, SRPc had issued a proposal to MasterCard and Visa asking them to consider a compromise in terms of licensing agreements and ownership rights to the application technology the issuers would install for their PIN and signature debit programs. 

As it turns out, the PIN debit networks and SRPc didn’t have to wait long for the Brands' move.

On July 30, 2013, Visa and MasterCard issued a press release that essentially renders the SRPc proposal moot.  The Brands reached a compromise on their own, exclusive of any arrangement with SRPc and D-PAS (Discover’s payment application), which would have allowed for the routing of debit transactions through the PDNs.

This was a jointly issued press release announcing an agreement between just Visa and MasterCard to license each other’s respective common U.S. debit solutions “to meet the industry need for a streamlined approach to route U.S. chip debit transactions over multiple, unaffiliated networks,” according to the release.

But what about Regulation II of the Dodd-Frank Act? The Act’s so called Durbin Amendment requires that merchants have a routing choice of between at least two unaffiliated networks. Let’s look at those words “unaffiliated networks.”  The unaffiliated networks have to be associated with a use case.  Signature was one use case.  PIN is another.  So, for PIN transactions, the unaffiliated networks amount to anything but Interlink if the card carries a Visa brand or anything but Maestro if it carries a MasterCard brand.

So it appears that the cross-licensing agreement means that MasterCard could send everything to Interlink and be in compliance with Durbin. And Visa?  They could send everything to Maestro and ditto – they’d be in compliance as well. 

So what does that mean for Star?  For NYCE?  For Shazam?  For Pulse?  For any of the PIN debit networks? 

Without their software on the EMV chip it appears they’d be cut out of the debit routing business.

And, by the way, where are the card issuing banks on this? Is it in their interest for the PDNs to survive? And what about competition in the network business?

Competition is good.  Having alternatives is good.  On an issue where there are more questions than answers, the Big Question right now is do the issuers feel that way as well?