Wal-Mart Wal-Mex

Wal-Mart Stores Inc. and Visa Inc. are locked in another legal battle, this time over chip-based debit cards.

The lawsuit was filed Tuesday in a New York State Supreme Court in Manhattan, alleging that Visa is preventing the discounter from requiring shoppers to enter a personal identification number only when using a debit card that is chip enabled. Currently, users have the option of just using a signature when the cards are used. According to the lawsuit, the company is asking the court to rule through a declaratory judgment on whether Visa can “inhibit Wal-Mart’s ability to route any transaction initiated on a Visa-branded debit card through any network available on the card.”

While there have been issues with retailers adopting and using the new protocol involving the chip-based cards, the matter here seems to involve questions of cost and security. There are two different payment networks. One involves the use of a PIN and the other the signature debit networks. The PIN network that Wal-Mart seeks to use has the discounter paying Visa less money per transaction, with the signature network costing Wal-Mart about five cents more each time a user opts to sign for purchases.

Visa did not respond to a request for comment.

Wal-Mart said in the lawsuit that the chip-and-PIN protocol “accords with global best practices for fraud prevention: PIN verification is much more secure than signature verification. It also enables Wal-Mart to route transactions across PIN debit networks rather than signature debit networks, which saves Wal-Mart and its customers money.

Wal-Mart also said in the suit that PIN verification is more secure because signatures “can be forged or copied, and cashiers may forget to check the signature on a receipt or point-of-sale terminal to make sure it matches the signature on the back of the card.” The lawsuit also noted that most developed countries overseas use the chip-and-PIN protocol, with the “U.S. the last major country to implement what is now the de facto global standard.” It also noted in the court document that Visa Europe, on its web site for a time, “promoted the superiority of PIN verification on chip cards….”

Wal-Mart said debit cards are the most frequently used plastic tender in its stores, “accounting for over 70 percent of the dollar value of U.S. Wal-Mart card payments.” It also said it takes steps to ensure that payment forms are safe and cost-effective, in line with the company’s “commitment to providing its customers with low-cost goods and services,” and that it has publicly called for the U.S. to implement the chip-and-PIN standard used in other advanced nations.

The discounter began instituting its chip-and-PIN protocol at some U.S. stores around November 2015. It rolled out the system to 3,700 U.S. stores by early February 2016.

A spokesman for Wal-Mart said, “Our customers understand PIN verification because it’s required to access their funds at ATM machines and PIN debit is the most common form of payment used in our stores. And Visa has acknowledged in many other countries that chip and PIN offer greater security. Visa nevertheless demanded that we allow fraud-prone signature verification for debit transactions in our U.S. stores because Visa stands to make more money processing those transactions. We believe Visa’s position creates unacceptable risk to customers and its actions and rules are inconsistent with federal law.”

Tuesday’s lawsuit is the latest tangle between the two firms. They have battled over card payment issues before. In 2014, Wal-Mart sued Visa for $5 billion, alleging that the swiping fees the payment network charged were excessive. That lawsuit came months after the discounter opted out of a class-action settlement between merchants and Visa and MasterCard over the issue of swiping fees. The two reached a settlement in November in their legal dispute over swiping fees.

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