Visa has agreed to change its rules and requirements for payment system stakeholders regarding the rollout of EMV smart chip technology in the United States.
The move comes after careful scrutiny from the Federal Trade Commission (FTC) and Federal Reserve Board of Governors under which it became apparent that Visa was violating current law that requires competition for debit network routing services.
To avoid further immediate enforcement action, Visa agreed to amend its Core Selection of Payment System Rule 18.104.22.168 to clarify that it does not apply to U.S. debit transactions, and modify its Transaction Acceptance Device Guide, and its Acquirer Implementation Guide. The Federal Trade Commission announced on Nov. 22 that it would halt the investigation due to these changes, while reserving its rights to revisit this violation in the future.
“RILA applauds the FTC and Federal Reserve for moving to quickly address this latest attempt by Visa to prevent competition in the payments market. Fish instinctively swim, the sun always rises in the East, and without watchful regulators Visa will always use its market power to act in anticompetitive ways,” said Austen Jensen, vice president of government relations at the Retail Industry Leaders Association.
“This highlights the importance of Regulation II for keeping bad actors in check, and is a huge win for ensuring debit network competition and innovation for existing and emerging payments,” said Liz Garner, vice president at the Merchant Advisory Group. “MAG is very pleased with the diligence of the Federal Trade Commission and Federal Reserve Board’s investigation of Visa’s violations of Regulation II, and look forward to working with both agencies to ensure a smooth transition as merchants and acquirers go through the process of altering EMV deployments in light of the recent rule changes.”
The FTC notes its investigation found that limited network availability on separate EMV applications inhibits merchant routing choice guaranteed by law. As such, any such checkout screen prompt, such as a customer selection between “Visa Debit” and “US Debit” or “Debit” and “Credit,” where the selection of “Credit” can only be transacted over the Visa network, is a violation of existing regulations.
The Visa Business News notice released on Nov. 22 clarifies that merchants “can promote their preferred verification method, including by discouraging the use of signature.” “It is our interpretation that this clarifies that a merchant has the choice of whether or not to deploy a PIN bypass (“credit” vs. “debit”) selection screen, which means that Visa cannot require any merchant to bypass more secure customer PIN transactions when a PIN is available on the card,” noted Garner. “PIN bypass was previously agreed upon as a voluntary component of EMV deployment by a diverse group of industry stakeholders at the U.S. EMV Migration Forum—now the U.S. Payments Forum—and now with these Visa changes, the optional nature of this process can truly be recognized.”
The Visa Business News notice also recognizes that all applications on the card must support any and all customer verification method (CVMs) for any network the issuer has chosen to enable on the card so that merchants maintain network routing choice on every transaction. This includes PIN, signature, biometrics and any other emerging CVMs, such as voice or facial recognition. However, the bulletin does not explicitly mention emerging CVMs, including biometrics, so this an area that the Federal Trade Commission will need to monitor closely in the future to ensure Visa does not violate the law.
The merchant community will look for further clarification from Visa regarding the following:
Visa’s plan to ensure the public, including all payment system stakeholders and regulatory authorities, are provided with full detailed information on the specific changes to Visa Core Rules 22.214.171.124, Visa’s Transaction Acceptance Device Guide, and Visa’s Acquirer Implementation Guide to ensure, among other items, that PIN bypass is optional.
Visa’s plans to ensure small and medium-sized businesses are educated on these rule changes.
Visa’s plans to ensure all stakeholders in the payment acceptance process are educated on these rules changes, including POS hardware providers, issuers, acquirers, smartphone manufactures, and digital wallet providers.
Visa’s plans to ensure their EMV technology, including the Common AID, will be updated to enable and support full network routing choice on all forms of customer verification methods (CVMs), including biometrics and emerging CMVs, in the marketplace.
Visa’s plans to ensure all payment system stakeholders are protected from the chargeback process and other fees, fines, or penalties while EMV checkout screens are being reconfigured and redeployed in a manner in which Regulation II rights are not being violated.
Visa’s plans to compensate stakeholders who previously deployed the screens given that EMV has been in the U.S. market for over a year, and network processing services and checkout screens have a major impact on customer experience, cost of card acceptance, and overall transaction security.