Bank of America Corp. is the second major card issuer to buck a recent smart card trend by structuring its EMV cards for U.S. commercial cardholders traveling abroad with chip-and-PIN technology instead of chip-and-signature.
The Charlotte, N.C.-based bank will make chip-and-PIN EMV cards available to its commercial card customers beginning in January, joining a growing movement among issuers to ease card-acceptance obstacles for frequent overseas business travelers, the bank announced Nov. 8.
BofA’s EMV card strategy is similar to that of Citigroup Inc., which in August announced plans to roll out chip-and-PIN cards for commercial cardholders (
In contrast, certain other large issuers, including JPMorgan Chase & Co. and U.S. Bancorp earlier this year announced plans to issue EMV cards that bypass the PIN requirement, opting for a configuration requiring cardholders to provide a signature only to authenticate chip-based cards (
BofA is adding the PIN feature to ensure customers can use the cards virtually anywhere abroad, including at unattended EMV-based payment terminals and kiosks where a PIN is sometimes required, Kevin Phalen, head of commercial cards and comprehensive payables for Bank of America Merrill Lynch, tells PaymentsSource.
Where no PIN is required, companies can process U.S.-issued chip-and-PIN cards with only a signature. As with all other U.S.-issued EMV cards, BofA’s also will have a magnetic stripe for use in payment terminals that do not accept smart cards.
“We’re going the chip-and-PIN route versus taking the simple chip-and-signature route many others have done because we want to ensure there will be no acceptance issues anywhere for customers,” Phalen says.
In most major international markets, merchants support payment cards equipped with an EMV chip, and often a PIN, to authenticate transactions. The chip helps prevent cloning of cards, which is a common fraud tactic crooks use to exploit mag-stripe payment cards using “skimmers,” analysts say. Chip-based cards block most counterfeit card fraud, and the use of PINs helps block losses from lost and stolen cards, according to card-security experts.
As chip-based cards become more common worldwide, more and more U.S. banks have announced plans to issue EMV-based payment cards to frequent travelers and commercial cardholders to eliminate acceptance obstacles, especially in Europe, where a growing number of payment terminals require a chip card.
There are arguments both for and against the chip-and-PIN versus the chip-and-signature approach, depending on an issuer’s goals and the card-usage patterns of its customers, experts say.
In most cases, cardholders traveling abroad will not encounter acceptance problems with U.S.-issued chip-and-signature EMV cards, Guy Berg, an executive with Minnetonka, Minn.-based Datacard, which offers EMV card technology consulting seminars to U.S. issuers, tells PaymentsSource.
A “small” number of payment terminals in Europe require a PIN because they lack a live communication connection to a card-payment network for immediate authorization, so such transactions are authorized “offline,” Berg says.
A cardholder traveling throughout Europe by train, for instance, may encounter occasional train-ticket payment terminals that require a PIN for offline authorization, he says. “But the vast majority of EMV-based payment terminals and kiosks outside the U.S. will accept a U.S.-issued signature-only EMV card with no problems,” Berg says.
Though U.S.-issued signature-only EMV cards are configured to process effectively without a PIN, some merchants abroad are unfamiliar with such cards, Randy Vanderhoof, executive director of the U.S.-based Smart Card Alliance, tells PaymentsSource.
“Some people using these EMV signature-only cards overseas are getting questions from merchants who are uninformed and don’t understand the card can process without a PIN,” Vanderhoof explains. “The card works fine, but sometimes you’re dealing with a lack of merchant awareness and language barriers, forcing the cardholder to explain the card’s technology, and that can create confusion.”
To avoid such problems altogether, BofA decided to make all its EMV cards chip-and-PIN, Phalen says.
“The reality is that with only a chip plus a signature, users may still have problems using their EMV cards at unattended terminals and train-ticket kiosks,” Phalen says.
However, the chip-and-PIN approach can create additional hassles for U.S.-based business travelers because it requires additional cardholder education, George Peabody, director of emerging technologies at Mercator Advisory Group, tells PaymentsSource.
“Remembering an infrequently used PIN that’s different from (that of a customer’s personal) PIN debit card can cause customer service problems, too,” Peabody says, noting that for many issuers the added complexity of the chip-and-PIN approach is not worthwhile when the likelihood of cardholders encountering acceptance problems is “so small.”
BofA developed its chip-and-PIN card “in response to customer demand,” Phalen says. The bank’s first EMV card application is for travel-and-entertainment cards, and eventually the bank plans to add EMV capabilities for purchasing cards, he says.
The bank introduced chip-and-PIN cards last year for corporate clients in Europe that were well-received, Phalen said. BofA’s commercial chip-and-PIN card is offered as Visa and MasterCard in the U.S.; it is offered only as a MasterCard in Europe.
BofA so far has no plans to launch a consumer version of its EMV card, bank executives said.
“Because chip-enabled cards can store more data to enable more functions, we see this offering as a first step toward developing more commercial card capabilities,” Phalen said, declining to specify future EMV card capabilities.
“The next step from here is to continue to move to contactless payment for commercial cards and ultimately to full integration (of commercial cards) with mobile devices,” he said.
Phalen did not specify the timeline for adding mobile features to commercial cards, noting that it is “a bit further off.”
BofA is among the last major banks to announce an EMV card program for U.S. travelers and corporate card users, but “by the time the card rolls into the market we’ll be right in step with those that have previously announced plans to roll out EMV cards,” Phalen said.
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