Johnston-based debit card network SHAZAM Inc. today announced it has reached an agreement with Visa Inc. that sets the stage for members of its network to move forward with more-secure smart chip technology in debit cards.
Terry Dooley, chief information officer of SHAZAM, said the SHAZAM network is among five debit card networks out of 18 nationwide that have reached agreements with Visa. The agreements ensure that issuers will be able to maintain choice and interoperability in the transition to EMV technology, also referred to as chip-and-pin cards. The agreement enables its card issuers to use Visa's common debit application identifier, or AID, for Visa- and SHAZAM-branded cards and transactions.
Last year's massive Target security breach has prompted calls to accelerate the transition to smart-chip cards, which are more secure than the traditional magnetic strip cards, and which are widely used in Europe.
"The agreement means merchants will have the option to accept either the common AID or a global AID, depending on what their business requirements may be," Dooley said. SHAZAM is still negotiating with MasterCard Inc. for a similar agreement; just two debit networks have reached agreements with MasterCard so far, he said.
EMV technology employs an embedded smart chip in cards that interact with a point of sale terminal or automated teller machine to provide greater transaction security. All debit card issuers, particularly smaller financial institutions, should conduct cost-benefit analyses as a critical first step to determine the potential returns and risk of moving to EMV cards, Dooley said.
SHAZAM is part of a 10-member Debit Network Alliance formed in December 2013 that's working toward common governance standards as EMV cards are rolled out in the United States, a process that's expected to happen within the next two years.
"You look down the road six months, and my guess is all debit networks will have license agreements with the card issuers," Dooley said. "I think you'll see the vast majority of banks move forward and begin their programs in 2014."