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.
