More U.S. issuers 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.
On June 1, Silicon Valley Bank announced it would issue chip-and-signature cards to travelers, echoing a strategy JPMorgan Chase & Co. announced in April (
The decision to omit a PIN is peculiar because the appeal of EMV cards for U.S. consumers is that they reduce friction when making payments in countries that have adopted the EMV standard. By prohibiting the use of a PIN, issuers are not removing all of the problems consumers experience at the point of sale, experts say.
“You are putting your customers in a situation where they will have to explain and educate clerks that expect you to enter a PIN at various locations outside of the U.S.,” said Gwenn Bézard, co-founder and research director at the Aite Group LLC in Boston.
The issuers insist that the opposite is true, that signature transactions are the smoother way to introduce customers to EMV technology.
“Our commercial card clients aren’t carrying PIN numbers,” says Pradeep T. Moudgal, Silicon Valley 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 there are still points of friction but says signature-only EMV cards will be useful in most situations.
“Where they can’t use the card is at transit stops, and kiosks,” says Moudgal. “But other than that, it’s fine.”
Eventually Silicon Valley will migrate its entire card portfolio to EMV cards, he says. The bank eventually will allow cardholders to use a PIN.
Silicon Valley said June 1 that it has begun offering an EMV-equipped credit card, called the World Elite MasterCard for Business, to its predominantly technology-focused business customers (
In April, Chase said it would offer a chip-and-signature version of its Palladium credit card, a Visa-branded product it issues to its high-end private and commercial banking clients, starting this month. It said it plans to offer EMV versions of its other credit cards marketed at frequent international travelers later this year.
David Porter, Chase general manager of card services, says there are specific interbank and regulatory hurdles that make issuing a chip-and-PIN card difficult.
“There are other complexities, if you want to go to full-scale chip and PIN,” he says, but “I really can’t think of any establishment or merchant where a chip signature card is not accepted.”
One hurdle for PIN, Porter says, is that for a cardholder to reset a card’s PIN from a foreign ATM, Chase would need to establish 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 says. “The aspect of universal acceptance here is obviously important.”
Some U.S. issuers have met the regulatory requirements to include a PIN. Wells Fargo & Co. also in April announced it would offer both chip-and-PIN and chip-and-signature cards to travelers.
State Employees’ Credit Union in Raleigh, N.C., and United Nations Federal Credit Union, which caters to U.N. employees, also issue EMV cards to U.S. residents.
Travelex Currency Services Inc. last year announced plans to offer MasterCard-branded prepaid EMV cards in foreign currencies at 180 U.S. retail locations. It began selling the card online last month (
Before these rollouts, which began last year, U.S. residents that wanted to use an EMV card when they traveled needed to open an account with a foreign bank. Even banks that issued EMV cards in U.S. dollars in other countries, such as Chase, did not offer them to their customers back home.
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 a niche of customers that 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 they travel overseas. Merchants accustomed to EMV cards resist mag-stripe cards, and many kiosks are not designed for cards that lack EMV chips.
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 (
All of Wal-Mart Stores Inc.’s U.S. payment terminals are able to accept chip-and-PIN transactions.
Jack Jania, vice president and general manager for secure transactions at the chip maker Gemalto NV’s North America business, says 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 e-mail provided by a spokesperson. “MasterCard and Visa require that all attended [point-of-sale] devices have the ability to support chip and signature, and both payment brands require that cards must have the ability to support chip and signature (with the exception of brands such as Maestro).”
At least one expert insists 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. “Chip is useful if you want to have multiple applications on it. So if you wanted to have loyalty points you can add more stuff onto the chip. The PIN, though, is the main method for integration; that’s the advantage.”
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