The controversy involves Visa forcing chains to accept more expensive signature—as opposed to the more retail-friendly PIN—authorization. Best Buy is still accepting Visa magstripe cards plus other brands' contactless offerings.
The Visa contactless issue is, technically, not a different price for contactless per se. The problem involves a Visa prohibition against allowing a PIN to be used with a Visa contactless debit card and it’s the lack of a PIN option that pushes those transactions into a much higher interchange rate. Mastercard's contactless cards have no such restriction.
Best Buy started accepting Visa contactless back in August 2007 and it was in all of their stores by April 2008, but by July 2009, it started pushing back against new Visa rules forcing higher signature rates and Best Buy issued a statement July 16 that it “is constantly looking at ways to reduce the cost of check lane tender. As part of this exercise, we are evaluating the continued acceptance of Visa-issued contactless payment cards in our stores in light of recent price increases. However, at this time we have not completed our analysis.”
"After several discussions with Visa produced no agreeable changes," the chain started removing its acceptance of Visa contactless cards in October, completing the cutoff in November, said one Best Buy executive involved in the decision. The cutoff happened store by store along with POS upgrades.
"Our decision was based on the costs associated with requiring contactless debit transactions be processed as signature debit," the Best Buy executive said.
Word has been slow in getting out, with many Best Buy store-based associates unaware of the change—with several insisting in early January that it was still accepted—and even Visa is still proclaiming on its contactless Web site--as of Tuesday (Jan. 5)—that Best Buy is accepting the cards.Visa had heralded Best Buy's initial acceptance of the contactless card and this is the latest threat to the wireless technology. Even some new converts to contactless—such as Home Depot and Subway and Sports Authority—are decidedly unenthusiastic about the deployment, often making the move only after a partner (typically a card brand) covers all costs and sometimes writes a check for more than all costs.
Contactless initially suffered from credible reports questioning its security, but industry changes to the contactless cards—most significantly the removal of some customer-identifying data that was being broadcast to anyone listening—made that less of an issue.
And contactless cards had initially—and, to a major extent, still have—accuracy issues, with frequent reports of double- and triple charges appearing on consumer bills.
But even setting those negatives aside, contactless has suffered most not from a series of negatives nearly as much as the absence of positives. In short, the reasons for consumers to use the cards have always been weak.
The cards were positioned as more convenient than magstripe, a claim that didn't work well as the time needed to wave the card was not materially less than the time needed to swipe it. The RFID approach is much more efficient in an application such as EZpass—where cars barely need to slow down driving through toll booths—than in retail checkout.
The Best Buy move is critical, if for no other reason than it's symbolism. (And, yes, Best Buy has been using contactless readers from Motorola’s Symbol group, but the symbolism reference was not an attempt at a bad play-on-words.)
Given the large number of retail sites that are not fond of the Visa signature restriction, this Best Buy move could give them political cover for also pulling out—or at least threatening to do so. And the fact that a major chain has actually pulled out might make Visa more willing to believe that others would do the same if major concessions aren't offered.