Message to retailers: Stop playing politics with payment security

It’s no secret that innovation requires investment and commitment, especially when it comes to payment security. 

Consumers benefit most when all participants come together to achieve results. That is why credit unions and the financial services industry are committed to developing and investing in an electronic payments system that protects and benefits the millions of Americans who use it every day to make secure and convenient payments. 

{mosads}Our commitment as an industry to protecting consumer data is the driving force of our innovation.  There have been recent examples of that work – notably, a new chip that is embedded in your credit and debit cards. That chip is part of what’s called “the EMV migration” – technology that brings more-intelligent security to a credit and debit card by using a unique, one-time code to authenticate card transactions. This transition represents the latest security enhancements for payments, but it certainly is not the end of the road – data security is a rapidly changing and complex issue that requires a multi-layered approach.  

However, it is worth noting that EMV adoption will also likely have a side effect of increasing online fraud. An October 2014 Javelin study shows online card fraud will rapidly increase despite the U.S. transition to EMV. That’s why we are investing in new technologies such as tokenization, biometrics like voice and fingerprint recognition and point-to-point encryption – all in addition to EMV chip cards.        

New technology isn’t the only way that we can help to protect consumers. We also need national data security standards for all businesses that handle financial information, including merchants. Consumers’ information is protected when in the hands of financial institutions, which are secure and well regulated through the Gramm-Leach Bliley Act. Consumers deserve the same level of protection when their information resides in merchant networks and systems. Currently, merchants don’t have to abide by the same rules as those applied to the financial industry. This leaves consumers extremely vulnerable, as evidenced by the numerous retail data breaches that have compromised millions of consumers’ sensitive financial information.  

Ultimately, the electronic payment systems are interdependent. The enhancement of the overall payment system and its security requires support from all parties, including merchants, issuers and networks. 

While most industry participants are focused on advancing innovation to protect consumers, a few retail interest groups have tried to delay the adoption of these security features. Whether it is turning off terminals that accept tokenization or pushing to delay the migration to EMV, retailers need to cease such tactics and work together with the financial services industry to protect consumers.  

Regrettably, this isn’t the first time that efforts by retail interest groups have hurt consumers. In October 2011, the Durbin Amendment was implemented, masked as a reform measure as part of the Dodd-Frank Wall Street Reform and Consumer Protection Act. The legislation capped the amount that retailers pay to accept debit cards.  

Today, we are reminded that after countless false promises from retailers about passing on savings to consumers from the Durbin amendment, consumers haven’t seen a dime. While merchants have walked away with a $32 billion windfall, consumers have seen a decrease in the availability of free checking accounts, higher checking account fees, higher minimum balance requirements and the elimination of debit rewards.  

Four years after the failure of the Durbin amendment, our hope is a simple one – that big box retailers will put politics aside to focus on improving the safety of the electronic payment system to better protect consumers. We want to continue innovating with all parties involved – retailers, networks, processors, financial institutions and others – to build a safer, faster payments system and implement merchant standards that will ensure the security of consumers’ payment information. We encourage retailers to get on board with us to achieve this goal.

Hunt is senior vice president of Government Affairs and general counsel for the National Association of Federal Credit Unions (NAFCU).