Visa is announcing plans to accelerate the migration to contact and contactless EMV chip technology in the United States. The adoption of dual interface chip technology will help prepare the U.S. payment infrastructure for the arrival of NFC-based mobile payments by building the necessary infrastructure to accept and process chip transactions.

Not only will chip technology accelerate mobile innovations, it is also expected to secure payments into the future through the use of dynamic authentication. Chip technology greatly reduces a criminal’s ability to use stolen payment card data by introducing dynamic values for each transaction. Even if payment card data is compromised, a counterfeit card would be unusable at the point-of-sale without the presence of the card’s unique elements. By eliminating static authentication, we reduce the value of stolen cardholder data, benefiting all stakeholders.

Visa’s plan includes merchant incentives to upgrade to EMV chip-enabled terminals, requirements for acquirer processors to support chip acceptance and the introduction of U.S. liability shift policies. Specifically, Visa will waive PCI DSS compliance validation requirements to encourage merchant investment in contact and contactless chip payment terminals. Visa will also require acquirer processors to ensure their systems support dynamic data acceptance, i.e., chip, and will institute a domestic and cross-border counterfeit liability shift.

Infrastructure Upgrade and Dynamic Authentication Benefits
The adoption of chip technology based on global standards will help prepare the U.S. payment infrastructure for the arrival of Near Field Communication (NFC)-based mobile payments, given that the underlying processing infrastructure and required back-end systems are the same as for EMV chip cards. Additionally, in a card- present or physical POS environment, EMV chip technology has proven to be the most effective and broadly adopted dynamic data authentication solution available in the marketplace today.
EMV chip technology is already being used around the world to facilitate contact, contactless and mobile payments, and has been leveraged for emerging complementary services like public transit, Internet and mobile banking. Based on extensive research and the positive experience expressed by many major countries, Visa will promote the broad adoption of EMV chip technology in both contact and contactless / mobile form factors for card-present transactions across all markets, including the U.S.
As the POS payment infrastructure continues to evolve from the static magnetic stripe to intelligent devices such as EMV chip cards and NFC mobile phones, it is critical to ensure that cardholders can continue to make convenient, secure and reliable payments for card-absent transactions as well.
Visa’s new digital wallet with “click-to-buy” functionality will be able to support dynamic authentication across multiple channels, including the e-commerce environment.

Visa will also enhance intelligent network-based fraud detection tools, such as Visa Advanced Authorization, to complement dynamic and risk-based authentication methods.
Visa Public 1
Roadmap for U.S. Migration to Dynamic Authentication Solutions
Visa’s plan to encourage U.S. adoption of dynamic EMV chip authentication technology includes the following three initiatives:

1. Expand the Technology Innovation Program (TIP) to merchants in the U.S. For more information, refer to the 9 August 2011 Visa Bulletin “Visa Expands Technology Innovation Program for U.S. Merchants to Adopt Dual Interface Terminals.”
2. Build the processing infrastructure for chip acceptance by establishing a U.S. acquirer processor EMV chip processing requirement. For more information, refer to the 9 August 2011 Visa Bulletin “Visa Sets U.S. Acquirer Processor Mandate for Chip Transaction Processing.”
3. Establish domestic and cross-border POS counterfeit liability shift policies. For more information, refer to the 9 August 2011 Visa Bulletin “Visa Announces U.S. Participation in Global Point of Sale Counterfeit Liability Shift.”

Over the coming months, Visa will provide technical guidance to issuers, acquirers, processors and merchants to support payment system participants as they execute these actions.
While stakeholders collectively prepare for the future, Visa will continue to secure the current payment environment by:

• Providing effective network-based risk management services, like Visa Advanced Authorization and Transaction Alerts
• Ensuring that all participants do their part to protect sensitive cardholder data by, at a minimum, complying with Payment Card Industry Data Security Standards (PCI DSS)
• Evaluating and promoting new security solutions, such as encryption and tokenization, as they emerge. Next Steps

Over the coming months and years, Visa will make adjustments to its products, operating regulations and security programs to help consumers, issuers, acquirers and merchants adopt dynamic authentication solutions. This effort will also require the participation of many key entities; Visa is committed to working with its stakeholders to further develop the industry’s U.S. and global roadmap to adopt EMV chip technology.

Download PDF of this Visa 2011 Chip Migration & Mobile Payments Merchant Bulletin

Ingenico Reacts Positively to Plans by the Card Association to Bring Smart Card technology to the U.S; Added Security Features to Reduce Card Fraud for Retailers and Cardholders

Atlanta, GA — August 16, 2011. Ingenico, the leading worldwide provider of payment devices and services, reacted positively to the recent announcement by VISA Inc. to accelerate the migration to EMV contact and contactless chip technology in the United States. Boasting the largest installed base of EMV-enabled terminals (over 15 million) globally, Ingenico sees the arrival of the smart card technology as the next logical step in preparing the U.S. payments ecosystem to benefit from the international interoperability and newly emerging non-traditional NFC-enabled mobile payments technology. The EMV and other next generation chip-based payment technologies will enhance the current payment infrastructure in the U.S. by positioning it to accept and handle chip transactions, and securing payments through the use of dynamic card authentication. The added security features that promise to reduce the impact of card-based fraud will benefit both retailers and cardholders.

With our global presence and multiple successful EMV card migrations around the world, including most recently Canada, we have accumulated an unparalleled level of EMV expertise and knowledge,” said Thierry Denis, president of Ingenico, North America. “We fully understand chip-based technology benefits for retailers and cardholders and are uniquely qualified to lead the U.S. migration to EMV and contactless acceptance. Not only will chip technology reduce fraud levels for merchants and card issuers, it will also provide American consumers with the flexibility and convenience to use their payment cards outside of the U.S. where they can not currently do so. ”

For the past 12 months Ingenico has been anticipating and preparing for the migration of EMV card technology in the U.S. and serves on many committees to bolster broader awareness of this technology. Ingenico is the only terminal manufacturer represented on the EMVCo. Board of Advisors, the governing body of the EMV Integrated Circuit Card Specifications for chip-based payment cards and acceptance devices, and is a member of the Leader Council of the Smart Card Alliance, a non-profit association driving the understanding and adoption of smart card technology in the U.S.

With VISA’s moves to accelerate EMV and mobile payments adoption in the United States, now is the time for EMV-savvy leaders of the acceptance market to step up to the challenge and provide the education, support and programs needed to help merchants ensure a smooth transition,” said Randy Vanderhoof, executive director of the Smart Card Alliance.

Driven by its strategic vision based upon innovation and security, Ingenico has successfully helped shape the migration and development of chip-based smart card payment infrastructure for its customers around the world. Today, the company continues on its path of innovation by responding to rapidly changing customer needs with high-performing products and innovative solutions needed to support the new forms of payment including mobile, contactless and NFC.

Ingenico has made significant changes to its product mix and organization in North America during the first half of 2011. We are growing in capacity, but more importantly we are adding critical industry expertise such as EMV and NFC to our already capable team,” said Gregory Boardman, senior vice president of Product & Development, Ingenico, North America. “Through investment in new contact and contactless technology, people and processes, we are well-positioned to help U.S.-based customers migrate to EMV and NFC acceptance. Our entire line of TELIUM products, which is certified to the latest PCI security standard, comes standard with integrated EMV card readers and options for integrated NFC acceptance. ”

Visa is announcing plans to accelerate the migration to contact chip and contactless EMV chip technology in
the U.S. The adoption of dual-interface chip technology will help prepare the U.S. payment infrastructure for the
arrival of Near Field Communication (NFC)-based mobile payments by building the necessary infrastructure to
accept and process chip transactions.

Not only will chip technology accelerate mobile innovations, it is also expected to enhance payment security
through the use of dynamic authentication. Chip technology greatly reduces a criminal’s ability to use stolen
payment card data by introducing dynamic values for each transaction. Even if payment card data is
compromised, a counterfeit card would be unusable at the point of sale (POS) without the presence of the
card’s unique elements. By eliminating static authentication, we reduce the value of stolen cardholder data,
benefiting all stakeholders.

Visa’s plan includes merchant incentives to upgrade to EMV chip-enabled terminals, requirements for acquirer
processors to support chip acceptance and the introduction of U.S. liability shift policies.

Specifically, Visa will waive Payment Card Industry Data Security Standard (PCI DSS) compliance validation
requirements to encourage merchant investment in contact and contactless chip payment terminals. Visa will
also require acquirer processors to ensure that their systems support dynamic data acceptance (i.e., chip) and
will institute a domestic and cross-border counterfeit liability shift.

Visa’s Counterfeit Liability Shift Policies

Visa intends to institute a liability shift in the U.S. for domestic and cross-border counterfeit transactions
effective 1 October 2015. Visa’s global POS counterfeit liability shift policies are designed to encourage EMV
chip card issuance and acceptance in participating geographical regions, effectively creating a more secure
environment for transactions within and between each participating Visa region. Note: The liability shift
encourages chip transactions because any chip-on-chip transaction (i.e., a chip card read by a chip terminal)
provides dynamic authentication data, which helps to better protect all parties.

With this type of liability shift, the party that is the cause of a chip-on-chip transaction not occurring (i.e., either
the issuer or the merchant’s acquirer) will be financially liable for any resulting card-present counterfeit fraud
losses. When a transaction occurs using chip technology, any liability for counterfeit fraud, though unlikely,
would follow current Visa Operating Regulations.

The policy assigns liability for counterfeit fraud to the party that has not made the investment in EMV chip cards
(issuers) or terminals (merchants’ acquirers). The policy encourages wider deployment of EMV cards and
terminals.

EMV chip implementation is accelerating globally. Today, excluding the U.S., 44 percent of all cards are EMV
chip cards, and 74 percent of all terminals are EMV chip-capable, with 62 percent of cross-border transactions
conducted with a chip card at a chip terminal.

U.S. Participation Introduced in Global Counterfeit Liability Shift Policy

Visa plans that effective 1 October 2015, the U.S. will be included in the Global POS Liability Shift Policy, which
will apply to all issuers and merchants’ acquirers in the U.S., with the exception of transactions at Automated
Fuel Dispensers (AFDs). Transactions made at AFDs will be excluded from the liability shift for a period of two
(2) years due to the challenges faced by the petroleum industry in upgrading terminals to accept EMV chip
cards. Similarly, effective 1 October 2017, transactions made at AFD terminals will be included in the Global
POS Liability Shift Policy.

Note: This liability shift policy change excludes counterfeit fraud at U.S. ATMs. Visa will continue to evaluate
the potential for an expansion to include ATMs.

Preparing for Payment Technology Evolution

As the U.S. point-of-sale payment infrastructure continues to evolve from the static magnetic stripe to intelligent
devices such as EMV chip cards and Near Field Communication (NFC) mobile phones, this liability shift policy
change will help ensure that the acceptance infrastructure is ready. It will also allow acquirers, merchants and
issuers to invest in new technology to ensure that cardholders can continue to make secure and frictionless
transactions across all channels.

Visa dynamic authentication roadmap will reduce fraud and enhance international acceptance

SAN FRANCISCO, Aug. 9, 2011 /PRNewswire via COMTEX/ –

Visa Inc. (NYSE: V) today announced plans to accelerate the migration to EMV contact and contactless chip technology in the United States. The adoption of dual-interface chip technology will help prepare the U.S. payment infrastructure for the arrival of NFC-based mobile payments by building the necessary infrastructure to accept and process chip transactions that support either a signature or PIN at the point of sale.

“By encouraging investments in EMV contact and contactless chip technology, we will speed up the adoption of mobile payments as well as improve international interoperability and security,” said Jim McCarthy, global head of product, Visa Inc. “As NFC mobile payments and other chip-based emerging technologies are poised to take off in the coming years, we are taking steps today to create a commercial framework that will support growth opportunities and create value for all participants in the payment chain.”

Not only will chip technology accelerate mobile innovations, it is also expected to secure payments into the future through the use of dynamic authentication. Chip technology greatly reduces a criminal’s ability to use stolen payment card data by introducing dynamic values for each transaction. Even if payment card data is compromised, a counterfeit card would be unusable at the point of sale without the presence of the card’s unique elements. By reducing static authentication, we diminish the value of stolen cardholder data, benefiting all stakeholders.

“Dynamic authentication is the key to securing payments into the future,” said Ellen Richey, chief enterprise risk officer, Visa Inc. “Adding dynamic elements to transactions makes account data less attractive to steal and takes more merchant systems out of harm’s way, shrinking the battlefield against criminals. The migration to chip technology will be an important security layer and a critical step in a comprehensive strategy to use dynamic authentication across all markets and all channels.”

Globally, Visa will continue to support a range of cardholder verification methods including signature, PIN and no-signature for low-value, low-risk transactions. In the longer term, we expect that the use of static verification methods such as signature and PIN will be reduced or eliminated entirely as new and dynamic forms of cardholder verification are implemented.

Visa’s plan to encourage the U.S. adoption of dynamic chip authentication technology includes the following three initiatives:

• Expand the Technology Innovation Program to Merchants in the U.S.–Effective October 1, 2012, Visa will expand its Technology Innovation Program (TIP) to the U.S. TIP will eliminate the requirement for eligible merchants to annually validate their compliance with the PCI Data Security Standard for any year in which at least 75 percent of the merchant’s Visa transactions originate from chip-enabled terminals. To qualify, terminals must be enabled to support both contact and contactless chip acceptance, including mobile contactless payments based on NFC technology. Contact chip-only or contactless-only terminals will not qualify for the U.S. program. Qualifying merchants must continue to protect sensitive data in their care by ensuring their systems do not store track data, security codes or PINs, and that they continue to adhere to the PCI DSS standards as applicable.
• Build Processing Infrastructure for Chip Acceptance — Visa will require U.S. acquirer processors and sub-processor service providers to be able to support merchant acceptance of chip transactions no later than April 1, 2013. Chip acceptance will require service providers to be able to carry and process additional data that is included in chip transactions, including the cryptographic message that makes each transaction unique. Visa will provide additional guidance as part of its bi-annual Business Enhancements Release for acquirer processors to certify that their systems can support EMV contact and contactless chip transactions.
• Establish a Counterfeit Fraud Liability Shift — Visa intends to institute a U.S. liability shift for domestic and cross-border counterfeit card-present point-of-sale (POS) transactions, effective October 1, 2015. Fuel-selling merchants will have an additional two years, until October 1, 2017 before a liability shift takes effect for transactions generated from automated fuel dispensers. Currently, POS counterfeit fraud is largely absorbed by card issuers. With the liability shift, if a contact chip card is presented to a merchant that has not adopted, at minimum, contact chip terminals, liability for counterfeit fraud may shift to the merchant’s acquirer. The liability shift encourages chip adoption since any chip-on-chip transaction (chip card read by a chip terminal) provides the dynamic authentication data that helps to better protect all parties. The U.S. is the only country in the world that has not committed to either a domestic or cross-border liability shift associated with chip payments.

Today’s announcement builds on similar international programs to encourage the migration to EMV chip. In February 2011, Visa announced the Technology Innovation Program for international merchants. The program, which was available beginning March 31, 2011, was intended to recognize the security benefits of dynamic authentication, enabled by EMV chip, and offer tangible benefits to merchants who update their POS infrastructure to accept chip cards. Visa has now expanded this program to include U.S. merchants, but will require terminals to support both contact and contactless chip payments.

Moving forward, as the point-of-sale payment infrastructure evolves from the static magnetic stripe to intelligent devices such as EMV chip cards and NFC mobile phones, it is critical to ensure that cardholders can continue to conduct convenient, secure and reliable payments for card-not-present transactions as well. Visa is designing its new digital wallet with “click-to-buy” functionality able to support dynamic authentication across multiple channels including the eCommerce environment. Visa will also continue to enhance intelligent network-based fraud detection tools such as Visa Advanced Authorization and cardholder transaction alerts to complement dynamic and risk-based authentication methods. As always, effective fraud prevention requires multiple layers of security.

Industry Support

Today’s announcement supports an increasing interest in chip technologies from across the industry:

• “As the leading global foodservice retailer, McDonald’s already has a great deal of experience with chip technology, including in the U.S. where we have deployed contactless chip terminals to help us serve our customers even faster,” said Dave Weick, Chief Information Officer and SVP Shared Services, McDonald’s Corporation. “We’re pleased that Visa has provided a roadmap that will allow us to move towards the next generation of payment technology, while at the same time take advantage of the security benefits of EMV chip and dynamic authentication.”
• “Visa’s plan to encourage chip adoption and lay the groundwork for mobile payments is a positive development,” said Kevin Knight, executive vice president, Nordstrom, Inc. “We appreciate their efforts to promote improved technology so that our customers have more reliable and secure card use and payment for their purchases.”
• “There is no security silver bullet. But smartcards and smartphones using EMV adds a strong layer for payment transaction security as well as online banking, access to medical records and more,” said George Peabody, director, Emerging Technologies Advisory Service, Mercator Advisory Group, Inc. “The roll-out of EMV in the U.S. gets much needed dynamic data into the authentication mix. This is a welcome step toward lowering fraud at the point of sale and online. It’s time.”

To read more, visit the Visa Viewpoints Blog at http://blog.visa.com/.

Click to Tweet: Visa plan to accelerate U.S. EMV chip migration, supporting mobile payment infrastructure, int’l acceptance and security bit.ly/qsFzDA.

About Visa Inc.: Visa is a global payments technology company that connects consumers, businesses, financial institutions and governments in more than 200 countries and territories to fast, secure and reliable digital currency. Underpinning digital currency is one of the world’s most advanced processing networks — VisaNet — that is capable of handling more than 20,000 transaction messages a second, with fraud protection for consumers and guaranteed payment for merchants. Visa is not a bank and does not issue cards, extend credit or set rates and fees for consumers. Visa’s innovations, however, enable its financial institution customers to offer consumers more choices: pay now with debit, ahead of time with prepaid or later with credit products. For more information, visit www.corporate.visa.com.

SOURCE Visa Inc.

How can merchants use the US vs Visa and MasterCard settlement to lower  costs and improve EBITDA? Most believe the most critical element to any solution is knowing exactly what merchant fees are for cards presented. Thus while the settlement is a huge win for merchants, The Federal Reserve Bank of Boston concludes merchants do not likely have the information or capability to fully take advantage of the new rules. IN this article I’ll review how merchants can use our CenPOS technology to leverage the new rules, without needing  to decipher the interchange rate for every transaction in real time.

Note that American Express did not participate in the settlement, thus any suggestions do not apply for their brand.

This is an excellent article and I recommend reading it. Federal Reserve Bank of Boston Public Policy Discussion: An Economic Analysis of the 2010 Proposed Settlement between the Department of Justice and Credit Card Networks. Excerpts:

In 2010, the Department of Justice (DOJ) filed a lawsuit against the credit card networks American Express, MasterCard, and Visa for alleged antitrust violations. We evaluate the extent to which the recently proposed settlement between the DOJ and Visa and MasterCard is likely to achieve its central objective: “…to allow Merchants to attempt to influence the General Purpose [Credit] Card or Form of Payment Customers select by providing choices and information in a competitive market.” In word and spirit, the Proposed Settlement represents a significant step toward promoting competition in the credit card market. However, we find that merchants are unlikely to be able to take full advantage of the Proposed Settlement’s new freedoms because they currently lack comprehensible and complete information on the full and exact merchant discount fees for their customers’ credit cards.

The basic problem is that merchants currently lack sufficient information to disclose fees or differentiate their prices according to the method of payment. In theory, the Proposed Settlement would allow merchants to try to steer consumers toward lower-cost payment instruments by disclosing the fees merchants incur in accepting payment cards, and by offering enhanced discounts. In practice, however, merchants may not be able to use these privileges effectively because they may not know the exact merchant fee on each credit card until long after the transaction has taken place, and even then merchants typically learn only their aggregate monthly fees and not the specific fee for accepting a given card. Interchange fees—which account for the bulk of merchant fees—range from below 1 percent to over 3 percent. Merchants may be aware of this range, but they currently do not have all of the information they need to enable them to match an individual credit card presented by a consumer to the corresponding merchant fee for that card. Therefore, merchants would not be able to disclose the relevant card fees to their customers or to completely and accurately differentiate prices across payment instruments.

If merchants had the necessary information in real time (that is, at or before the time of the transaction) to facilitate the mapping of cards and fees, under the Proposed Settlement they could attempt to steer customers toward lower-cost payment methods. However, merchants would still be restricted in the mechanisms they could use to this end because the Proposed Settlement did not challenge the Visa and MasterCard rule that prohibits merchants from imposing surcharges that reflect the costs they incur in processing payments.

End excerpts.

The new rules, together with Dodd–Frank Wall Street Reform and Consumer Protection Act, empower merchants with new flexibility to manage costs. The industry response is that only the biggest of merchants can benefit from the settlement. But that’s not true. Our technology enables merchants to provide discounts right now.

Ideas to reduce payment processing costs based on new rules:

1. Check your merchant agreement schedule A. Does it state anywhere on the agreement “pass through interchange”. If not, your options to reduce fees may be limited.
2. Put up a sign for a minimum charge amount. (Minimum cannot apply to debit cards.)
3. Put up a sign informing customers of really basic information. For example,  you could put up a sign “Please help us keep costs low by using your debit or check card. For every $100 sale our costs average: Cash $0, Debit/ check card $.90, credit card $1.85, rewards card $2.50.”
4. Implement our CenPOS technology and offer discounts based on rules you set. For example, do you want to offer a percent or a flat amount? Do you want to offer the rule only if they use one card brand such as Visa? Only over a certain amount? Only on certain days? The options are endless and can be remotely managed in real time, completely removing cashiers from any part of the discount process.
5. Identify your average ticket and average cost per transaction. Test and measure different incentives to customers using CenPOS.
6. Implement CenPOS technology in a retail setting and steer customers to enter their pin number, reducing risk of chargebacks. The 2010 national average for pin debit penetration was less than 29%; CenPOS users averaged 74%.

Considerations for offering incentives of any type or payment steering.

• Do you know what percent of your transactions are debit right now?
• Do you know what percent of your transactions are any type of card right now?
• Do you know your average cost per transaction on debit? On other card types?
• Do you know if card type usage is cyclical by time of day, day of week, location of your facility, or how payment is accepted (retail, online etc)

CenPOS technology provides real time information about all of the above so you can manage how and what type of discounts to offer. Merchants can use integrated check and ACH services with CenPOS.

CENPOS SALES: Call the credit card processing hotline at the top of the page for direct merchant sales, ISO sales, and other 3rd party reseller sales.

July 20, 2011, The United States of America, and other states, announced a final settlement in US vs MasterCard International Inc., and Visa Inc. The antitrust lawsuit said that MasterCard and Visa have rules in place that prevent merchants from offering consumers discounts, rewards and information about card costs, ultimately resulting in consumers paying more for their purchases.

In summary of the settlement, the purpose is to allow merchants to influence consumer payment choices by disclosing information about their costs for using different cards. Merchants can:
- Offer a rebate or discount at the point of sale for using a particular brand or card type, or form of payment.
- Offer a free product at the point of sale for using a particular brand or card type, or form of payment.
- Offer a free, enhanced, or discounted service or at the point of sale for using a particular brand or card type, or form of payment.
- Offer incentives or other benefits.
- Express a preference for different card or payment types.
- Communicate how much it costs them to accept different payment types.

Interestingly, nothing shall prevent a merchant from disparaging either brand.

US Visa International Operating Rules and MasterCard Rules must be updated within 5 days to reflect the new language included in the settlement.

JUSTICE DEPARTMENT SUES AMERICAN EXPRESS, MASTERCARD AND VISA TO ELIMINATE RULES RESTRICTING PRICE COMPETITION; REACHES SETTLEMENT WITH VISA AND MASTERCARD

Department to Litigate Against American Express to Promote Competition Among Credit
Card Networks Enabling Merchants to Benefit Consumers

MONDAY, OCTOBER 4, 2010 WWW.JUSTICE.GOV

WASHINGTON — The Department of Justice announced today that it filed a civil antitrust lawsuit in U.S. District Court for the Eastern District of New York challenging rules that American Express, MasterCard and Visa have in place that prevent merchants from offering consumers discounts, rewards and information about card costs, ultimately resulting in consumers paying more for their purchases. The department also said that the rules increase merchants’ costs of doing business. Joining the department in its lawsuit are the states of Connecticut, Iowa, Maryland, Michigan, Missouri, Ohio and Texas.

At the same time, the department announced that it has filed a proposed settlement with Visa and MasterCard, that, if approved by the court, would require the two companies to allow merchants to offer discounts, incentives, and information to consumers to encourage the use of payment methods that are less costly.

According to the complaint, American Express, MasterCard and Visa maintain rules that prohibit merchants from encouraging consumers to use lower-cost payment methods when making purchases. For example, the rules prohibit merchants from offering discounts or other incentives to consumers in order to encourage them to pay with credit cards that cost the merchant less to accept.

“With today’s lawsuit we are sending a clear message: We will not tolerate anticompetitive practices,” said Attorney General Eric Holder. “We want to put more money in consumers’ pockets, and by eliminating credit card companies’ anticompetitive rules, we will accomplish that.”

“These restrictive rules restrain competition among credit card networks for merchant acceptance and distort the competitive process,” said Christine Varney, Assistant Attorney General in charge of the Department of Justice’s Antitrust Division. “The proposed settlement with MasterCard and Visa is an important step in bringing more credit card competition to the point of sale. The department’s lawsuit against American Express will continue that effort and, if successful, allow merchants more freedom to benefit their customers.”

Credit card acceptance costs U.S. merchants approximately $35 billion each year. Those costs are collected from merchants in the form of a “swipe fee” they pay every time a credit card is used. American Express has the highest merchant fees of any credit card network. Merchants pass on these billions of dollars in fees to all their consumers in the form of higher retail prices. By preventing merchants from rewarding consumers when they use less expensive credit cards to make a purchase, American Express, MasterCard and Visa have inhibited merchants’ ability to reduce card acceptance costs, and therefore their retail prices to consumers.

The proposed settlement requires MasterCard and Visa to allow their merchants to:

Offer consumers an immediate discount or rebate or a free or discounted product or service for using a particular credit card network, low-cost card within that network or other form of payment;
Express a preference for the use of a particular credit card network, low-cost card within that network or other form of payment;
Promote a particular credit card network, low-cost card within that network or other form of payment through posted information or other communications to consumers; and
Communicate to consumers the cost incurred by the merchant when a consumer uses a particular credit card network, type of card within that network, or other form of payment.
The proposed settlement allows any merchant that only accepts Visa and MasterCard to take advantage of the relief immediately.

The ongoing litigation against American Express seeks to allow merchants that accept American Express to engage in the same kind of discounting and encouragement that the proposed settlement with MasterCard and Visa allows. Until American Express’s restraints on merchants are lifted, the many merchants that accept American Express, as well as Visa and MasterCard, will not be able to take full advantage of their new options under the proposed settlement, the department said.

American Express Company, the parent of American Express Travel Related Services Company Inc., is a New York corporation, with its principal place of business in New York City. Cardholders used American Express credit and charge cards for $419.8 billion in purchases in 2009. MasterCard is a Delaware corporation with its principal place of business in Purchase, New York. Cardholders used MasterCard credit and charge cards for $476.9 billion in purchases in 2009. Visa is a Delaware corporation with its principal place of business in San Francisco. Cardholders used Visa credit and charge cards for $764.2 billion in purchases in 2009.

The proposed settlement, along with the department’s competitive impact statement, will be published in The Federal Register, as required by the Antitrust Procedures and Penalties Act. Any person may submit written comments concerning the proposed settlement within 60 days of its publication to John R. Read, Chief, Litigation III Section, Antitrust Division, U.S. Department of Justice, 450 Fifth Street N.W., Suite 4000, Washington D.C. 20530. At the conclusion of the 60-day comment period, the court may enter the final judgment as to MasterCard and Visa only upon a finding that it serves the public interest.

The court will determine a pretrial schedule for the case against American Express once American Express files its response to the government’s lawsuit.

# # #

Phase 1 of Visa’s new chargeback rules are now in effect. Effective for fraud-related chargebacks processed on or after 16 April 2011, in lieu of a paper-based signed cardholder letter stating that the cardholder neither authorized nor participated in a transaction, issuers may submit information collected from the cardholder electronically.

Essentially, the dispute can now be completed elecronically instead of having to mail in a letter. The following reason codes are impacted by this rule change:
•     Reason Code 57 Fraudulent Multiple Transactions
•     Reason Code 62  Counterfeit Transactions
•     Reason Code 81  Fraud – Card-Present Environment
•     Reason Code 83  Fraud – Card-Absent Environment

Fraud-Activity Certifications
In April 2011, in lieu of a cardholder letter, card issuers will be required to certify through Visa Resolve Online (VROL) three fraud-activity  certification requirements to support their chargeback.  VROL is an innovative Visa back-office system used by all Visa members to process disputes. The three requirements are the following:
•     Card status at the time of transaction (lost, stolen, counterfeit)
•     Date fraud activity was reported through VisaNet
•     Date account number was listed on the Exception File
The fraud-activity certifications validate that the issuer closed the cardholder’s account, fraud reported the account number to Visa and statused the account either lost, stolen or counterfeit. The fraud-activity certifications will only be required if the issuer elects not to send a cardholder letter. In October 2011, Visa will mandate issuers to send the fraud-activity certifications with or without a cardholder letter.

What does this mean for merchants? The time that lapses between the customer initiated dispute to the time  merchant receives such notification shrinks.