[Dave Birch] I was in a large, typical, American mall and I observed three “payment events” in quick succession. I won’t name any of the stores involved because it’s not really about them, but here’s what happened.

In sportswear Store One, I was surprised (and delighted) to see prominent signs near the registers saying “No Cash: Credit and Debit Only”. But when I made it to the register, I saw that the signs also said “Please have your ID ready”. Being English, I didn’t have any ID, so I couldn’t buy anything. Crazy, but that’s what happens when you rely on signatures instead of PINs. Incidentally, had I had an ID such as my British driving licence, then the store would have served me even though they had no conceivable way of verifying the ID. How this is meant to reduce card fraud, I have no idea.

US retailers rack up around $100 billion in identity fraud losses every year, absorbing nearly 10 times the cost incurred by financial institutions, according to a study from LexisNexis and Javelin Strategy & Research.

[From Finextra: US retailers face $100bn in ID fraud losses a year – study]

If the retailers had access to an actual, working, useful, 21st-century identity infrastructure then this nonsense would be in the dustbin of history already. In menswear Store Two, I found myself behind an English couple who were being thoroughly confused at the register. The store clerk asked them “credit or debit” and they said “debit” and presented an English scheme-branded debit card which, of course, didn’t work. The clerk had clearly seen this problem before, and told them that you have to press the “credit” button, remarking that “it’s just the way the computer works”. But, said the couple, we don’t want any credit, we want to pay from our bank account. The clerk was very reassuring, telling them that “don’t worry, the computer will take it from your bank”. They were quite upset, but then most people don’t really have any idea how the system works, so who can blame them.

The research reveals that only one in three people could correctly identify what an APR was. Whilst a worrying seven per cent were unable to recognise any payment terms, such as PIN, ATM and Bacs, when asked to identify them.

[From Payments Council – Confused about credit cards, puzzled by PIN? You’re not alone!]

Luckily, I was on hand with a pad and pencil to explain the situation, and after my very fascinating lecture on the evolution of signature and PIN debit in the US, the mechanisms for card processing and the implementation of Visa/MasterCard acceptance at US POS, the irate customers had calmed down. In fact, they were so calm that they seemed to have dozed off, so I left quietly.

In menswear Store Three, I paid by swiping the trivially-countefeitable magnetic stripe on a MasterCard chip and PIN card and signed “Yaya Toure”. Since no-one looked at the signature, it didn’t matter, but it’s a useful fraud detection technique for me, since a thief who steals my card will probably sign “David Birch”.

In payments, plastic works just fine. That’s why digital wallets will have to “revolutionize” shopping through innovations in loyalty and couponing in order to get consumers to switch their payment patterns.

[From 7 Emerging Payments Themes – Bank Innovation]

The idea that the current card payment system is the most efficient and most effective way to deal with retail payments is simply wrong. I’m hardly talking out of school hear, since people who work in the industry know perfectly well that it remains too slow, too expensive and too opaque, which is why (for example) Visa are spending so much money on developing a wallet proposition. And there are plenty of competitors out there snapping at the incumbents heels, which is why it’s such a fun time to be in this business.

Why would retailers or banks, for whom credit or debit card purchases are working well, want to introduce this?

[From Is your phone the wallet of the future? | Circuit Breaker – CNET News]

Who says that they are working well? Not the retailers, who are constantly complaining about the cost of accepting cards (which, indeed, is much higher in the US than elsewhere), and not the consumer who couldn’t buy sportswear (in this instance, me). Right now, Google’s Wallet, ISIS and Visa’s V.me are all about taking existing plastic cards and using virtual versions of them, but this must surely be only a stepping stone to new retail payment instruments. There’s plenty of room for innovation.

These are personal opinions and should not be misunderstood as representing the opinions of
Consult Hyperion or any of its clients or suppliers



  1. But how could the store verify my English driver’s licence even if I had left it in my wallet? They could not possibly tell whether it is real or not – and since my card was a Travelex MasterCard pre-paid US Dollar card that does not have my name on it anyway – I can’t see how that would have helped, if you see what I mean.

  2. Dave, I suspect that the “sportswear Store One” policy of asking for your ID has nothing to do with verifying your signature. I suspect that it is probably a very effective anti-fraud technique. If I steal credit card data via a skimming device or illegal access to transaction data, it may be relatively easy to produce fraudulent plastics. However, it will be much more difficult to produce a “valid” driver’s license, passport, or state ID. Unless I steal your entire wallet and look like you, I cannot use your card at that retailer. There is no need for the clerk to look at the signature.

  3. Yes, but if you are a criminal you have a choice. You can show me your identification (risky), try to create some sort of fake ID that looks legitimate (difficult), or try an easier way to steal such as card-not-present transactions (which is exactly what happens in most countries that have migrated to chip cards). It still sounds like a great and effective anti-fraud strategy for the retailer.

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