business news in context, analysis with attitude

The New York Times has a piece this morning about how the certification of new and more secure payment terminals that accept debit and credit cards with digital chips has been moving very slowly, leaving retailers who have spent considerable funds installing the equipment frustrated by the delays.

The frustration comes with an economic cost, the Times writes: "The cost of waiting, retailers say, is piling up. Until recently, banks covered much of the cost of fraudulent purchases. Since Oct. 1, though, merchants that cannot accept chip cards have had to shoulder the cost of fraud, and banks have not been shy about passing along the bill."

The Times goes on: "The long delays are just the latest black eye for the deployment of the new systems. Some consumers have not yet received new cards. Many merchants have not bought the updated equipment. And even when the cards and the terminals have been updated, they have generated confusion and slow lines. Many of the complications were widely predicted, but the certification system has added an unexpected wrinkle — and lots of finger-pointing.

"Banks say that retailers waited till the last minute to update their terminals. Retailers point to financial ties between the banks and the companies that provide certification, saying there is no motivation to move faster." Indeed, the story notes that a coalition of retailers is suing the banks, accusing "the major card networks of deliberately creating impossible requirements for merchants."
KC's View:
I think in this story I was most surprised to read a comment by Jason Oxman, CEO of the Electronic Transactions Association (ETA), a trade and lobbying group, who "dismissed the idea that processors might benefit from delaying certification" and said he had not heard of kinds of certification delays described in detail by the Times story. My experience is completely anecdotal, but I have to say that the vast majority of payment terminals that I use in retailers around the country seem to be a) equipped with chip card readers, and b) unable at this point to accept chip cards. I didn't realize until now that it might be a certification issue ... and the combination of the Times story and my own limited experience makes me believe that the ETA guy may be blowing smoke.

My paint-with-a-way-too-broad-brush feeling tends to be that given a choice, banks and credit-debit card networks would prefer to pass off all responsibility for everything they can to other entities.