Walmart has filed a lawsuit against Visa related to Visa’s policy requiring merchants to allow cardholders to choose whether to enter a PIN for debit transactions, even if the customer uses a chip-enabled card.

The problem?  Signature-based debit transactions are processed on Visa’s debit network, often at a higher fee to the merchant than other network routing options that would be available if a PIN were used.  For those who thought the Durbin Amendment solved the issue of higher debit card pricing for signature transactions a few years ago, it didn’t.  The Durbin legislation limited the card network interchange fee that could be charged to the merchant on a debit transaction, but it didn’t eliminate the possibility of a non-PIN debit transaction.

Signature-based debit transactions also have much higher fraud rates… Walmart claims 90%+ of debit card fraud stems from signature transactions.  To add insult to injury, an ever-increasing number of debit cards now include EMV chips, but the added fraud-prevention potential of the chip+PIN is largely lost in a signature transaction.  See my separate article “Are Americans too dumb for Credit Card PINs?”

We should be migrating toward PINs for chip and/or debit card transactions, like the rest of the developed world.


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