Goliath vs Goliath: Stores And Banks Attack Each Other; FBI Caught In Crossfire

Here’s a delightful article from Bloomberg: the FBI accidentally got involved in a heated dispute between billionaires. About? PINs. You know, those four-digit codes used to protect the owners of debit cards.

If you can’t see what it is about PINs that caused some of the richest people in America to transform with rage, and pancake the naifs at the FBI who got caught in the middle, well, read on.

Welcome to the fight over credit-card swipe fees, one of the more antagonistic, long-running battles in Washington where retailers like Wal-Mart Stores Inc. and Target Corp. vie against financial firms including Visa Inc. and JPMorgan Chase & Co. Both sides retain armies of lobbyists, trade associations and public relations specialists to push their agendas. The fight over personal identification numbers, or PINs, is the latest front.

Retailers have long fumed about the cost of accepting credit cards — about 2 percent of each transaction. Those swipe fees, also known as interchange, are set by Visa and MasterCard. Most of the money ultimately goes to banks, which say they use it to fund security and technology upgrades and cardholders’ beloved reward programs. Merchants counter that reducing the payments will lower prices at the register.

How did the FBI get all Goofus-y? It suggested that customers would be better protected by using PINs with credit cards too. America’s biggest banks were all like:

The FBI immediately recanted, showing all the backbone of a sea anemone or the FDA.

Why is the idea of using a PIN for a credit card, as well as a debit card, such a big problem for, say, HSBC? Because that could cost it $$$.

banks oppose setting PINs for credit cards, partly because their research shows it will anger shoppers by slowing them down at the register. And that might prompt them to pay other ways. The firms also are concerned merchants will use the extra security feature to argue credit cards are essentially like debit cards, which use PINs and carry a much lower swipe fee.

Merchants were also pissed because requiring a register to accommodate a credit card + PIN combination requires technology. Many of them are still adjusting to accommodating the new credit card chip, which is intended to make your Visas safer, but require new gizmos that must be bought and paid for.

And now Congress is involved: Senator Dick Durbin has written the head of the FBI an Angry Letter.

“Is the FBI aware that payment card networks and banks in the United States have an incentive to dissuade consumers and merchants from using PINs?” Durbin wrote. “Is the FBI concerned that this incentive may cause card networks and banks to set security specifications that seek to maximize fee revenue instead of maximizing fraud prevention?”

Comey must respond to Durbin by Nov. 15.

Get ’em, Dick.

Right now, credit cards, chip or no chip, do feel pretty unsafe. Banks don’t want us to think so. But consider: after swiping a credit card to make a purchase, you have to sign the receipt. When was the last time anyone checked your signature or your ID? Let alone called you on a potential discrepancy? No one at a register has that kind of energy or time.

When Ben used, and then accidentally lost, my credit card at a gas station in New Mexico in the middle of the night, it would have been nice to feel the additional level of protection a PIN provides. Instead we had to cancel the card immediately and wait 7–10 days for a new one. We weren’t too inconvenienced by having to use debit instead, and we got to help the various retailers at which we shopped save money. But still: stress.

Like the FBI did before it realized that having principles got it into trouble, I lean towards making commerce safer, even at the expense of making it slightly slower too.

Upshot: the FBI is pretty blunder-y; the bank lobby is pretty terrifying, even to the FBI; and credit cards are pretty evil and probably less safe than using debit. I still use my one credit card for most purchases, though, because Rewards. Damn those clever banks for making credit so alluring!

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