JPM, Wells May Prompt Other Banks to Issue EMV Cards in U.S.

Now that two of the largest U.S. banks have thrown their weight behind chip cards, there could soon be a competitive impetus for others to put the cards in Americans' hands.

This summer, JPMorgan Chase & Co. and Wells Fargo & Co. will join a few smaller financial institutions that are already issuing such cards to customers. For consumers to fully gain the added security benefits of the EMV Integrated Circuit Card Specifications, which involve storing credentials on the encrypted chip in the card, most U.S. merchants would need to upgrade to terminals that can read the cards.

JPMorgan Chase and Wells Fargo have no illusions that the retailers are in a hurry to do so. They are issuing the cards to help U.S. customers who have been spurned when trying to make payments while traveling Europe, where EMV is commonplace. Other big issuers in this country may have to follow suit to keep customers happy.

"American travelers overseas are having problems," said Patricia Hewitt, the director of the debit advisory service at Mercator. "They're calling issuers and saying, 'We don't want to have to switch to someone else's card or carry another card and we want to be able to transact easily overseas.' "

Offering EMV cards may not be enough to attract customers from other banks, but it helps solidify relationships with clients that travel frequently, who "can represent a more profitable account opportunity" for issuers, Hewitt said.

Still, Hewitt and others were skeptical that moves by JPMorgan Chase and Wells Fargo would prompt U.S. merchants to upgrade their payment terminals to accept EMV cards.

Indeed, neither Wells Fargo nor JPMorgan Chase is promoting EMV for domestic use at this stage.

"This particular technology is just much more focused on our international travelers and the reality of the overseas payment environment," David Porter, the general manager of card services at JPMorgan Chase, said in an interview Thursday.

"We're not looking to the future necessarily here," he said. "It's just looking at the present."

The imprimatur of JPMorgan Chase and Wells Fargo is not a compelling enough reason for retailers to take similar steps, experts said.

"Merchants have got to spend money" to upgrade, said Eric Grover, a principal with payments consulting firm Intrepid Ventures in Minden, Nev. They may not be willing to do so unless required to by the networks or encouraged to by a shift in liability for fraudulent payments.

The amount of fraud is smaller in physical point of sale transactions than in online commerce, which EMV does not address, Grover said.

"EMV … has some efficacy at the point of sale but … it doesn't address the online environment, where the fraud problem is an order of magnitude greater," he said.

JPMorgan Chase said Thursday it plans to begin issuing an EMV version of its Visa Inc.-branded Palladium credit card, offered to its private, investment, treasury and commercial banking clients, starting in June. It will add other Chase-branded cards marketed at frequent international travelers, such as airlines rewards cards, later in the year.

Porter would not say how many cards the company plans to issue.

JPMorgan Chase is using an EMV specification called chip-and-signature, which allows a cardholder to authenticate a transaction by signing for it like they would with the more common magnetic-stripe credit cards today.

The more common authentication method for EMV is chip-and-PIN, meaning a cardholder must enter a PIN to complete a transaction.

"We just wanted to make that as easy and hassle-free process as possible," Porter said about the decision to forgo using a PIN.

While requiring a PIN "absolutely adds" an extra layer of security, PIN authentication is not a requirement to meet EMV standards, said George Peabody, the director of the emerging technologies advisory at Mercator Advisory Group.

"The choice to do chip-and-PIN versus chip-and-signature is really an implementation decision on the issuer's behalf," Peabody said. "That is configured on the chip itself."

Regardless, "signature EMV is a huge improvement over mag-stripe" security, Peabody said.

While using a PIN to conduct debit card transactions is familiar in the U.S., it is an unfamiliar concept for U.S. credit card users.

"It does exist for cash advances at ATMs, but no one knows their [credit card] PIN," Peabody said. Wells Fargo announced on Wednesday that it will issue 15,000 EMV cards to consumer cardholders who are frequent international travelers.

Its cards will let users conduct both chip-and-PIN and chip-and-signature transactions, a spokeswoman for the San Francisco company said.

Both Wells Fargo and JPMorgan Chase are including magnetic stripes on their cards so customers can use them at U.S. merchants.

Some large U.S. retailers, including Wal-Mart Stores Inc., have advocated the adoption of chip-and-PIN cards.

Wal-Mart has installed terminals that could read chip-and-PIN cards.

"While we are pleased to see movement in the U.S. to the global EMV standard, we envision the most robust authentication environment to be chip and PIN only, with no mag-stripes or signatures," Jamie Henry, the senior director of payment services at the Bentonville, Ark., retailer said. "The most recent announcements are targeted to international travelers, but no solution will be complete until all U.S. consumers can benefit," he said.

JPMorgan Chase's and Wells Fargo's announcements add to the small roster of financial institutions that have been offering EMV cards on a smaller scale in the U.S., including State Employees' Credit Union in Raleigh, N.C., and United Nations Federal Credit Union, which caters to U.N. employees.

Travelex Currency Services Inc. last year announced plans to offer MasterCard Inc.-branded prepaid EMV cards in foreign currencies at 180 U.S. retail locations.