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US Credit Card Industry Failed To Innovate For A More Secure System: Study

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A study has revealed how vulnerable the U.S. credit card industry is, and stressed the need to establish adequate security standards.

Noted industry research firm Retail Payments Global Consulting Group says the leadership of EMVCo, an organization owned by the world's six largest payment card companies that sets technical specifications for credit, debit and other payment cards, has put profits ahead of security, driven up costs for businesses and consumers, and left the United States with a fraud-prone payment card system.

The research paper, titled "Payment Insecurity: How Visa and Mastercard Use Standard-Setting to Restrict Competition and Thwart Payment Innovation[CS1]", highlighted a systemic pattern of decision-making by EMVCo that put in place standards with less security and lead to more fraud risk just to help those card companies dominate the market.

The report says the U.S. payments system is less secure when compared to other international markets.

The study, conducted for the Secure Payments Partnership coalition, observed that the U.S. payments industry is being harmed by the card companies and EMVCo."

Because EMVCo is run entirely by the major card companies, it is not an appropriate organization to develop standards that have such high impact on the U.S. payments industry, according to the report's author and RPGC President and Managing Director Rene Pelegero.

Responding to the report, the National Retail Federation said that as millions of Americans experience credit card fraud, the responsibility to ensure safe credit card payment system in the country should be entrusted with a neutral third party standard-setting body.

The report shows that Visa and MasterCard own and control EMVCo and ensure it sets standards that the major U.S. financial services corporations can use to beat competitors "before the game even starts".

EMVCo bolstered VIAS's more than 20 years-old battle against unaffiliated debit networks, resulting in the implementation of less-secure chip-and-signature EMV cards in the United States, the report said.

EMVCo reportedly adopted expensive, complex and difficult-to-implement technology such as NFC because it prevents other competitors from entering the mobile payments market.

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