The first accord has been struck between the major credit card companies, Visa and MasterCard, and a debit network, First Data Corp., with the looming transition to new electronic payment processes. The swelling incidents of credit card fraud was put in the spotlight with Target Corp.’s security breach late last year. As the credit and debit industry looks to switch to more secure technology, debit networks are nervous about being left out in the cold.
First Data Corp’s Star network features an estimated 20-25% of domestic PIN-based electronic transactions. Having struck the first deal with Visa, First Data looks to be the first voice to join with Visa and MasterCard as they try to settle the debit industry’s future. The new partnership is devoid of royalties from Visa giving a positive indication of the arrangement being a true partnership as opposed a manipulation.
Debit processing networks recently formed the Debit Network Alliance in the interest of protecting their mutual interests and industry as new security measures are implemented in US credit cards.
The new anti-fraud measures center around the no cardholder verification method, or CVM chip, that is far more secure than the traditional magnetic strips. Additionally, the common application identifier, or AID, promises a new and more secure method of handling sensitive customer information. With Visa and MasterCard already having agreed to use common AID’s for their respective clientele, the Debit Network Alliance is searching for a way to preserve their future in the deit industry.
The CVM chip is far more prevelant in Europe and serve to confirm a customer’s identity at the point of sale for both debit and credit card transactions. Visa and MasterCard, in partnership with Europay, own the CVM chip technology. This could present a significant threat to the debit networks existing in the United States as the industry shifts to better anti-fraud measures.