How Will Discover's Membership in EMVCo. Affect EMV Migration in the U.S.?

Recently we reached the latest milestone on the yellow brick road to USEMV implementation.  On September 3 Discover announced that it had taken an equity stake in EMVCo.  For the uninitiated EMVCo. is the international entity that administers the standards for EMV. This is important because now all four of the major brands marketing payment cards in the U.S.—MasterCard, Visa, American Express and now Discover—have seats at the table where the EMV rules get made.  Sort of like a Justice League of payment brand superheroes.  

Although Discover joining EMVCo. didn’t get a lot of attention at the time, it really is a significant development for USEMV implementation. Astounding, really.  

Why? Consider the eight month-long effort by the Secure Remote Payments Council to keep the PIN Debit Networks relevant after EMV is implemented in the U.S. Those are largely documented below in previous posts. The anticipated launch of SRPc’s CommonCo later this month is the most recent move in this direction. CommonCo’s development was spurred by the agreement between PDNs to get behind a common debit application for EMV.   

Do you want to guess who spurred this effort? How about the newest caped crusader sitting around the Justice League payments table?

 So now we have a PDN owner with equity in EMVCo.  Where do we think this might lead?

 Pulse, the network owned by Discover, has been one of the most outspoken PDN voices since it became apparent about eight months ago that there might not be a big play for PDNs in EMV.  Since then Pulse has worked closely with its owner to ensure an application for EMV would include the PDNs as an alternative routing network in compliance with Regulation II of the Dodd Frank Act. 

Pulse was influential in the development of CommonCo and is a leading voice at the SRPc meetings where CommonCo’s rules are being written.  And their egalitarian approach  stands in stark contrast with the game of shadows being played by the Big Brands.

The question remains whether Pulse and Discover have done all they can do to ensure their card-issuing bank customers continue to see the value that PDNs bring to the payments industry. 

Of course, before that happens, the industry has to survive the uncertainty caused by Federal Judge Richard Leon and his ill-timed decision throw out two years of Solomonic  work by Federal Reserve Board analysts to set equitable debit interchange rates. I might lecture here about what happens when the government tries to fix prices, but that’s a post for another day.

The EMV Forum has a scheduled meeting next week in Dallas. The elevation of Discover to EMVCo. should help liven things up in the cocktail lounge. With the Brands migrating their strategy to behind closed door sessions, it looks like they may have inadvertently left a door open that could permit SRPc and CommonCo to lobby card issuers at a time when they should be making decisions about routing debit in a post-USEMV market. 

Word has it that some of the Brands’ reps are not planning on being in Dallas for the EMF meeting. That should calm the waters a little. Maybe EMF could get Judge Leon to come speak on what he was thinking when he issued his decision. That would liven the place up.