Since taking office, President Trump has championed American businesses and fought to ensure consumers are treated fairly. To uphold these values, the president should turn his attention to unfair practices used by major payment card companies that result in higher risks for shoppers and therefore less economic progress.
Right now, the standards for keeping your credit or debit card information secure when inserting, swiping, or tapping your card are set by an organization called EMVCo, which was founded in 1999 by MasterCard. Unfortunately, EMVCo is operated mainly by the largest card networks and, as a recent paper from the Retail Payment Global Consulting Group shows, the networks have abused that power to prevent competition from smaller, more innovative payment networks.
Big credit card networks prevent competition by requiring merchants to use expensive and difficult-to-implement technologies that basically price out smaller payment networks. For example, EMVCo requires that tap-to-pay cards operate by standards that are too expensive for smaller networks to use, forcing them to rely on larger networks to process transactions.
More recently, we’ve also seen this problem through “Secure Remote Commerce,” or SRC for short. EMVCo is branding SRC as a convenient, single click-to-pay button for online shoppers. However, similar to what it did with tap-to-pay, EMVCo is leaving the smaller networks out entirely and only allowing the biggest ones to operate on SRC.
Nowhere are these unfair and anticompetitive practices more apparent than through the big networks’ efforts to discourage merchants from requiring the use of PIN numbers for verifying card payments, despite the fact that it makes payments more secure.
The chip cards that have been rolled out in recent years are an improvement on the magnetic strips that the industry used to use. But, while the information being processed is more secure from fraud methods like skimming, chips do little on their own to prevent fraudsters from using a card that is lost or stolen.
That’s where PIN numbers come in. By providing an extra layer of security — both when the card is present and when it’s not — it keeps consumers safe from even more types of fraud. Given this, it would only be natural to assume networks would make it standard. Unfortunately, they don’t.
Why would major card networks want to stop merchants from prioritizing shoppers’ security?
Because many of the smaller, more cost-effective payment networks are PIN-based, meaning merchants could opt to use those smaller networks instead of big networks like Visa or Mastercard.
If you need any more proof that the true reason behind discouraging requiring PIN numbers is to prevent competition, just look to other countries where the major credit card companies aren’t the ones making the rules for payments. There, the use of PINs are the standard.
Unfortunately, these efforts to stifle competition only hurt small businesses and consumers in the end.
And without action, things will only get worse. Fraud remains a major problem for people across the U.S., and that will not change if large networks continue using their influence to put their bottom line above securing their customers’ payment information. We simply cannot allow major networks to keep promoting protectionist policies that drive away competition and increase security problems for customers.
That is precisely why President Trump and his allies in Congress need to find a solution to finally stop the major networks’ anticompetitive practices. The current status quo is putting businesses’ and consumers’ financial data in danger, and in turn risks slowing our country’s economy.
Robert Graham is the former chairman of the Republican Party of Arizona and served as a senior adviser to President Trump’s 2016 campaign.