MasterCard and Visa may be competing brands, but they are partnering up to meet mutual goals when it comes to card security in Australia.
The Australian Competition and Consumer Commission (ACCC) has granted the two card processing giants interim authorisation to coordinate a new campaign to promote the use of PINs on credit and debit cards.
The ACCC is also considering whether Visa, MasterCard, American Express and specific financial institutions – including major banks – should be able to coordinate activities in relation to the proposed removal of signatures as a method of authorisation for card transactions.
“A single message from industry is likely to lead to less confusion for customers and merchants,” ACCC Commissioner Dr Jill Walker said.
The campaign comes in light of a growing body of research that shows personal identification numbers (commonly referred to as PINs) are far superior to signatures when it comes to card security.
Similarly, the chip-and-PIN cards that have become standard for credit and debit card accounts over the last few years are much more effective at preventing card fraud than the basic magnetic strip cards.
In the submission to the ACCC, MasterCard and Visa said approximately 45% of credit card users still sign for purchases.
Their goal is to have 90% of sales approved through PIN by the end of 2013 and signatures banned by 30 June 2014.
The submission argues that “it is much more difficult for a fraud perpetrator to ascertain a PIN than to forge a signature” and that this step could significantly reduce the incidents and risks of paying by card.
“Historically, signature was one of the main types of cardholder verification …over time, merchant acceptance practices have become increasingly lax when it comes to verifying the signature on the transaction receipt,” Visa and MasterCard’s application to the regulator says.
“Often, the card is already returned to the customer’s wallet before the receipt is even signed…requiring the use of PIN removes the option of verification by signature.”
As a result, transactions should be more secure for both cardholders and merchants.
Potential PIN Problems
The Australian Retailers Association and most banks have supported the proposal from MasterCard and Visa, but there are some stakeholders that are not as convinced it should be the only way to pay by card.
A number of small businesses have made submissions to the ACCC raising concerns that it could cost them more money if PIN authorisation is the only option for cards.
Cafés and restaurants, in particular, are concerned that they will have to either purchase portable eftpos machines or ask customers to pay at the counter instead of returning their card and a slip of paper when they want to settle the bill.
It could also make it harder for customers to leave a tip or verify items and prices before they pay. That could mean fewer places are willing to split the bill, and hold ups when you do pay if you or any other customers want to review the charges.
Or, for smaller businesses, it could mean the difference between processing cards and taking cash only.
While these concerns are valid, MasterCard and Visa appear to prioritise card security over potential issues – perhaps with good reason.
There is an increasing number of smartphone applications and tools that allow small businesses to process card payments from a phone, such as PayPal Here and iCCPay.
These services mean businesses of any size can cut down on the cost of buying card processing equipment and also offer electronic copies of receipts.
Mobile payments also mean you could actually make a purchase without pulling out your credit or debit card.
If you had a PayPal account and PayPal Here on your smartphone, for example, all you would have to do is sign into the app and follow the prompts to pay a merchant that uses the service.
What these new options also highlight is that the way we pay for things is changing at a very fast pace. While card transactions are definitely up, so are other electronic transactions, such as mobile payments.
In turn, that means signatures could become less relevant over time. Card security, on the other hand, remains an issue either way.
The ACCC has clearly considered all of these factors and decided that interim authorisation will help MasterCard and Visa begin their campaign while the regulation body reviews all the details.
That means both of these card processing companies can work together to promote the use of PINs for plastic payments so that we are not bombarded with a range of advertising and educational materials.
The ACCC said it was planning to issue a draft decision by October 2013, and that it may grant an authorisation when it is satisfied that the public benefit from the conduct outweighs any public detriment.
So if you currently sign for your card purchases, it may now be time to look at the other payment options and security services available for your credit and debit cards.