Credit Card Companies Block Payment Security, Competition

According to an in-depth report, a systemic pattern of decision-making by EMVCo, an organization owned by the world’s six largest payment card companies, implemented standards with less security and resulted in greater fraud risk.

The white paper, “Payment Insecurity: How Visa and Mastercard Use Standard-Setting to Restrict Competition and Thwart Payment Innovation,” was conducted by industry research firm Retail Payments Global Consulting Group LLC (RPGC), on behalf of the Secure Payments Partnership (SPP), "which represents and advocates for industries that span the payments system," according to its website. 

“It is our conclusion that the U.S. payments industry is being harmed by the card companies and EMVCo,” said the report’s author, René Pelegero, president and managing director of Kirkland, Wash.-based RPGC. “The setting of payments standards for topics such as authentication and tokenization should be migrated away from EMVCo to independent and neutral national or international standards-setting bodies. EMVCo’s ownership by the credit card companies has put profits ahead of security, driven up costs for businesses and consumers alike, and has left the United States with a fraud-prone payments card system even as fraud has been reduced in the rest of the world.” 

“Millions of Americans have experienced credit card fraud, and that’s unacceptable,” noted Stephanie Martz, SVP and general counsel of the Washington, D.C.-based National Retail Federation (NRF), an SPP member. “Our payments system should be the strongest and most secure in the world, but we won’t get there unless we change the way we set security standards. This study shows that the card industry has repeatedly ignored innovations that could have given us a more secure system, and that cannot be allowed to continue. NRF remains committed to continuing our work with the card companies to find lasting solutions that will protect businesses and consumers alike.”

Hannah Walker, VP of political affairs at the Arlington, Va.-based Food Marketing Institute (FMI), also an SPP member, along with the National Grocers Association, likewise affirmed the white paper’s findings: “FMI members tell us that card fraud losses continue to rise each year, and there really seems to be no end in sight.”

Additional report findings include:

• Visa and MasterCard own and control EMVCo and ensure it sets standards that these card companies can use to circumvent competitors before negotiations among business partners even start. 
• EMVCo aided Visa’s 20-year-plus battle against unaffiliated debit networks, leading to the deployment of less-secure chip-and-signature EMV cards in the United States.
• EMVCo adopted expensive, complex and hard-to-implement technology such as near-field communication (NFC) because it keeps other competitors from entering the mobile payments market.
• EMVCo adopted an anticompetitive tokenization standard that discriminates against debit networks and noncard forms of payment.
• EMVCo’s Secure Remote Commerce standard, touted as a new integrated checkout platform for online payments, could make it difficult to route transactions through unaffiliated debit networks, create higher dependence on the card companies and raise merchants’ payment processing costs.

“FMI members value competition and strong industry standards that foster it,” wrote Walker in an online analysis. “Members of the SPP discussed the white paper findings at a congressional staff briefing on Capitol Hill. Panelists from the merchant and debit network community showcased key findings and offered constructive solutions.”