Special Report: Debit Networks Offer Common AID Solution
March 19, 2013
A consortium of ten U.S. debit networks today proposed a common U.S. debit application identifier (AID) that will enable debit transactions to comply with the network routing provisions of the Durbin Amendment when the U.S. shifts to the EMV security standard for payment card transactions. The Durbin Amendment—in addition to imposing caps on the amount of interchange issuers can charge for debit transactions—requires that merchants have the choice of at least two networks through which to route debit transactions. EMV rules directly contradict this . Unless a common AID was developed, the chip on each EMV card would have to carry an application for each network the transaction could be routed through—a practical impossibility from the perspective of chip architecture and cost, while network choice still would be restricted somewhat.
The consortium, led by many members of the Secure Remote Payment Council (SRPc) Chip-and-PIN Workgroup and the EMV Migration Forum, has agreed to a technology standard for a common AID that leverages Discover’s D-Payment Application Specification and a governance structure under which no one network has ownership of the technology.
With MasterCard- and Visa-imposed deadlines for migration to the EMV standard looming, concerned groups including debit networks, card issuers and card networks, have been working on a solution to the problem for more than 18 months. MasterCard and Visa each proposed solutions to the problem that would enable other debit networks to use their respective AID technology. Competing debit networks, however, were uncomfortable with an approach that would route every debit transaction through their competitors’ systems.
Ownership of the technology used to route the transactions was a significant factor in the consortium’s decision to advance an alternative to the MasterCard and Visa solutions, according to Mark Horwedel, CEO of the Merchant Advisory Group and member of the SRPc Workgroup.
“A solution in which ownership and management is shared by all parties that are going to utilize the technology,” Horwedel said, “is superior to one where a subset of the stakeholders own the technology.”
The SRPc also said its initiative addresses several technological limitations present in previous proposals. A major consideration other proposals did not fully address, for example, was the various options for Cardholder Verification Method (CVM) each system could utilize, according to Paul Tomasofsky, president of the Secure Remote Payment Council. The consortium’s new proposal enables all four CVMs (offline PIN, online PIN, signature verification and no CVM) whereas MasterCard and Visa’s technology only allowed for one or two of these choices. Tomasofsky also pointed out that neither MasterCard nor Visa supported both contactless and contact payments and today’s solution does.
The debit networks initially involved in the consortium include AFFN, ATH, CO-OP Financial Services Jeanie, NETS, NYCE, Presto!, PULSE, SHAZAM and STAR. According to the announcement, any debit network that wishes to participate in the consortium to “govern the common U.S. debit network and undertake steps to commercialize it,” is invited.