Payments Security & Innovation

Last Updated: December 12, 2024

The Issue

Innovations in the payments space, such as mobile payment platforms and wallets, could transform how Americans pay for goods and services.  

The opportunities for new technologies to improve the market and consumers’ experiences are endless; however, the United States is far behind the rest of the world in payments security and innovation. One reason is that the largest credit card networks set proprietary payments standards without the involvement of other stakeholders. This results in payments standards that prioritize business issues over security and stifle the game-changing technologies that could transform the U.S. market. 

One example of these problems is the lack of personal identification number (PIN) authentication at retail points of sale. At automated teller machines (ATMs), customers are required to enter a PIN, but retailers are restricted from requiring a PIN at their points of sale by the major card networks.  

This restriction reduces fraud protection and stomps out competition and innovation from the smaller debit networks (e.g., Star, Pulse, Shazam) that otherwise compete with the major card brands to handle transactions because many banks do not allow smaller networks to compete for transactions that don’t include a PIN. Without the use of PIN and other security innovations, card fraud will continue to climb. 

Retail Impact

Convenience stores process an estimated 160 million transactions per day, and most are on payment cards. 

As electronic payments become the predominant form of payment, the major card brands have set standards without the input of other stakeholders, such as retailers. This results in problematic standards that lack transparency and restrict retailers from taking appropriate measures to protect their businesses and consumers.  

For instance, convenience stores spent billions to upgrade and replace equipment to accept chip cards—but retailers are not allowed to require a PIN to verify the cardholder, leaving consumers and retailers vulnerable to fraud. 

NACS Position

Policymakers should examine and reform the current payment card standards process to ensure that everyone with an interest—from consumers and debit networks to merchants, processors and banks—have a say in these standards. We need everyone’s input to get standards that incentivize security and innovation rather than one sector’s profit motives. 

NACS believes one of these standards is ensuring the same technology used to protect a transaction at the ATM is allowed at a retailer’s point of sale. Today, that is a PIN and retailers should be able to require a PIN or other advanced authentication technology for credit and debit card transactions, including those that occur on a mobile device.  

As ATM security technology evolves, retailers should be allowed to evolve with it to protect their businesses and their customers.