More U.S. companies are committing to issuing EMV cards, commonly called chip and PIN for their primary security feature — but if you listen closely, you can hear the PIN drop.
Silicon Valley Bank plans to issue chip-and-signature EMV cards to travelers, without the option to use a PIN. This echoes a strategy JPMorgan Chase & Co. announced in April when it promised to begin issuing cards that adhere to the EMV Integrated Circuit Card Specifications. Other EMV issuers, including Wells Fargo & Co., have kept the option to use a PIN.
Experts said the decision to omit a PIN is peculiar, because the appeal of EMV issuance for U.S. consumers is that the cards reduce friction when making payments in countries that have adopted the EMV standard. By prohibiting the use of a PIN, issuers are not addressing all the problems consumers experience at the point of sale, experts said.
"You are putting your customers in a situation where they will have to explain and educate clerks that expect you to enter a PIN," said Gwenn Bezard, co-founder and research director at Aite Group LLC in Boston.
The issuers insist that the opposite is true: signature transactions are the smoother way to introduce customers to EMV technology.
"Our commercial card clients aren't carrying PIN numbers," said Pradeep T. Moudgal, Silicon Valley Bank's head of global cards and merchant services. "This simplifies it for a lot of people. It's not that we don't want to go with chip and PIN."
Moudgal admits that there are still points of friction, but said signature-only EMV cards will be useful in most situations.
"Where they can't use the card is at transit stops and kiosks," Moudgal said. "But other than that, it's fine."
Silicon Valley Bank said Wednesday that it has begun offering an EMV-equipped credit card, called the World Elite MasterCard for Business, to its predominantly technology-focused business customers.
The Santa Clara, Calif., retail bank, a subsidiary of SVB Financial Group, plans to migrate its entire card portfolio to EMV cards, Moudgal said. The bank will eventually allow cardholders to use a PIN, he said.
JPMorgan Chase, of New York, plans to offer this month a chip-and-signature version of its Palladium Visa credit card. It said it plans to offer EMV versions of other credit cards later this year.
David Porter, the general manager of card services at JPMorgan Chase, said there are specific interbank and regulatory hurdles that make issuing a chip-and-PIN card difficult for a U.S. bank.
"There are other complexities, if you want to go to full-scale chip and PIN," he said, but "I really can't think of any establishment or merchant where a chip-[and]-signature card is not accepted."
One hurdle for PIN, Porter said, is that if a cardholder wanted to reset a card's PIN from a foreign ATM, JPMorgan Chase would need a special agreement with foreign ATM managers.
"The chip and signature just gives us the smoothest possible advantage to our clients to help them spend as they travel," he said. "The aspect of universal acceptance here is obviously important."
Some U.S. issuers have met the regulatory requirements to include a PIN on their EMV cards for U.S. residents. State Employees' Credit Union in Raleigh, N.C., and United Nations Federal Credit Union, which caters to U.N. employees, issue EMV cards to U.S. residents.
Travelex Currency Services Inc. last year announced plans to offer prepaid EMV cards in foreign currencies at 180 U.S. retail locations.
Before these rollouts, which began last year, U.S. residents who wanted to use an EMV card when traveling needed to open an account with a foreign bank.
Despite the remaining friction, experts do not question the wisdom of issuing chip-and-signature cards as a way to increase transaction volume and serve customers who frequently visit countries where EMV acceptance is widespread.
The broad international adoption of chip-and-PIN cards has caused problems for U.S. residents who want to use their cards when traveling overseas. Many travelers have complained that U.S.-issued magnetic stripe cards have been rejected by merchants that are supposed to accept them. Many kiosks are not designed for magnetic-stripe cards.
Forty percent of all payment cards and 71% of terminals worldwide are now compatible with the EMV specifications, according to EMVCo LLC, the U.K. company that manages the guidelines.
Jack Jania, vice president and general manager for secure transactions at the chip maker Gemalto NV's North America business, said that some countries do not require a PIN for EMV transactions.
"Though it is has been the common approach, specifically in many European countries, to implement chip and PIN, there are countries that have implemented chip and signature," Jania said in an email provided by a spokeswoman. "MasterCard and Visa require that all attended [point of sale] devices have the ability to support chip and signature."
At least one expert insisted that it would make far more sense to issue EMV cards with a PIN.
"I don't understand it," said Zilvinas Bareisis, a senior analyst at Celent. "The PIN … is the main method for integration. That's the advantage."