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 The move follows several data breaches at U.S. retailers, including
one at Target Corp late last year involving the theft of about 40
million credit and debit card records.
The new group — which includes banks, credit unions, retailers and
industry trade associations — will initially focus on the adoption
of 'EMV' chip technology, MasterCard and Visa said in a statement on
Friday.
EMV cards, already used in Europe and Asia, store information on
computer chips rather than on traditional magnetic strips, making
them harder to counterfeit.
They can also require — depending on the issuer — that users enter a
personal identification number, or PIN, to make purchases, adding an
extra layer of security.
However, the National Retail Federation, the world's largest retail
trade association, said it had not joined the group because there
were no plans to immediately implement the PIN option, making for a
"half-baked solution."
"They're not serious about reducing fraud, unless they put a pin
on," said Mallory Duncan, the NRF's general counsel.
"We remain insistent that U.S. retailers' customers be given the
same protections as consumers in more than 80 countries who have
both a chip and a PIN securing their credit and debit cards," Duncan
said in a statement.
Visa and MasterCard declined to provide details on specific
proposals for the technology to be used in the cards or the make-up
of the cross-industry group.
The American Bankers Association did not respond to requests for
comment but Patrick Keefe, a spokesman for the Credit Union National
Association, confirmed that the trade association was part of the
industry group.
"The recent high-profile breaches have served as a catalyst for much
needed collaboration between the retail and financial services
industry on the issue of payment security," Visa President Ryan
McInerney said in the statement.
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STRIKING WHILE IRON IS HOT
MasterCard and Visa had already set a deadline of October 2015 for
U.S. retailers to adopt the new payment technology.
"Probably about 80 percent plus of the larger retailers were going
to be able to make the deadline anyways," said David Robertson,
publisher of payment industry newsletter The Nilson Report.
Robertson said the formation of the group would help push small and
mid-size retailers to adopt the new technology.
Banks and retailers have been dragging their feet over the upgrade,
at odds over how the costs would be split.
The NRF has said it could cost the U.S. retail industry about $30
billion to upgrade to chip-based cards, including equipment,
training and software.
"Banks and retailers want to make sure that if they invest in new
infrastructure, they'll get the return in reduced fraud," Wedbush
Securities analyst Gil Luria told Reuters.
MasterCard and Visa said the group would also address security
issues with mobile and online transactions. One proposed solution is
for traditional account numbers to be replaced by a unique digital
payment code.
Target said last month it was accelerating a $100 million program to
implement the use of chip-enabled smart cards to protect against
cyber threats, with a goal to have the technology in place by early
2015.
"In the aftermath of the Target breach, security is on the minds of
executives in the way it hasn't been in a very long time," Robertson
said. "This is a classic example of trying to strike while the iron
is hot."
(Additional reporting by Tanya Agrawal;
editing by Kirti Pandey, Don Sebastian and Ted Kerr)
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