Retailers Are Battling Honor-All-Payments

It was something that was bound to happen. The battle between merchants and major card brands has been building up for months now, with each new situation leading up to the heated climax on Thursday, when an advocacy group for big-box retailers condemned that a new twist on network rules was ruining the progress of mobile payments.

The problem comes down to a set of regulations that have been promoted by the big card brands such as American Express Co., MasterCard Inc., and Visa Inc. that require merchants to accept all of the cards if they happen to accept any of them, a very aggressive move from those companies. But now, instead of retreating, they are pushing this outrageous norm to digital wallets, prompting the disappearance of lower-cost services and discouraging merchants from switching on near-field communication technology at their terminals, as put by the Merchant Advisory Group, a Minneapolis-based organization that represents more than 100 retail and travel companies. Among these big companies, there is Wal-Mart Stores Inc. and Target Corp.

These regulations would mean that now merchants are obliged to accept every NFC wallet that supports whichever brand of cards they happen to use. The same thing would be applied by wallets using other technologies, such as mag-stripe regulators or quick-response codes. However, these new impositions are still somewhat unclear: have they been codified along with other network rules? Are they already implemented or they will be in the future? Nobody seems to address these concerns in a clear way.

Merchants further elaborate on their complaints, stating that the honor-all-wallets rules will force them to accept unwanted wallets that are being issued by their competition, giving them access to proprietary customer’s data, as well as requiring them to accept devices whose protection system is dodgy. But that’s not all.

The rule further proves to be counter-productive for competing for wallet providers that offer low-cost alternatives, such as PIN-debit or automated clearing house services, because merchants would be forced to turn down these services, forcing little-known newcomers to compete with nationwide firms.

But, as complex as this sounds, the MAG says that this should concern corner-store shopkeepers as well, as they usually have the same concerns the big merchants have, the only difference being that big merchants uncover these issues first.

However, Rick Oglesby, principal at consultancy AZPayments Group and senior analyst at Double Diamond Payments, says that the battle over the new honor-all-wallets rules is not ending soon. In fact, it may even have long-lasting effects, such as yet more litigation. And while everything is happening, “we will continue to see merchants build their own property solutions (such as Walmart Pay and Target Pay)”, he says.

Nonetheless, a surprising letter issued by MasterCard takes note of the matter on a slightly conciliatory tone. “MasterCard recognizes the importance of providing flexibility to payments participants, especially merchants who seek to improve the consumer shopping experience,” the network statement says. “We look forward to continuing to work with our merchants and issuers alike to ensure our rules are aligned with current trends and advanced next-generation technology.”


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