By Andrew R. Johnson
Bank of America Corp. (BAC) is throwing its muscle behind a
credit-card technology aimed at cutting down on hassles U.S.
cardholders may encounter when trying to make purchases while
traveling abroad.
The Charlotte, N.C., bank said Monday it is including so-called
EMV chips in many of its consumer credit cards targeted at frequent
travelers and high-net-worth customers. It also will include the
technology in several of its mass-market consumer products like the
BankAmericard Cash Rewards and BankAmericard cards as an optional
feature customers can request.
The move comes as Visa Inc. (V) and MasterCard Inc. (MA), the
world's largest payments networks, are pushing for broader adoption
of the technology in the U.S., where few banks and merchants have
upgraded to the standard. Bank of America, the second-largest U.S.
credit card issuer, could help to further adoption of EMV by
prompting more competitors to follow suit.
"The new chip-enabled cards will improve convenience and
security of customers' transactions when traveling abroad," Susan
Faulkner, consumer and small business products executive for Bank
of America, said in a statement.
Last year, Bank of America made the technology available on some
of its commercial cards, and its latest move follows efforts by
other large banks, including J.P. Morgan Chase & Co. (JPM),
Citigroup Inc. (C) and Wells Fargo & Co. (WFC) to upgrade some
of their wealthier customers to the chip technology.
EMV--which stands for EuroPay, MasterCard and Visa--is standard
in many countries in Europe and Asia, where both banks and
retailers have adopted the technology partly to cut down on fraud
from counterfeit cards. They are considered more secure than credit
cards with only magnetic stripes--the standard in the U.S.--because
cardholder data is stored inside a computer chip, making it
difficult for scammers to hack.
However, U.S. customers often run into problems using their
traditional credit cards in foreign countries, where self-service
kiosks like train-ticket machines typically can only read
chip-based cards. To cut down on customer-service headaches and
hang on to their best customers, banks here have begun including
EMV chips in travel-oriented cards.
Bank of America's move "is very consistent with what we're
seeing across the board," said Julie Conroy McNelley, a research
director for Aite Group LLC, a financial-services research firm.
"They're looking to add utility for their international travelers
and make sure they don't get inconvenienced when traveling overseas
with just a mag stripe, which doesn't work so well there any
more."
U.S. banks aren't likely to embark on a full-scale roll-out of
EMV cards in the near term because merchants must upgrade their
systems to handle the cards, said George Peabody, director of the
emerging technologies advisory service for Mercator Advisory
Group.
"A mass replacement isn't needed and it doesn't make sense"
until that occurs, Peabody said, noting such cards can cost banks
as much as $2 more each than traditional cards, depending on the
size of bank.
About 3% of payment terminals in the U.S. can handle EMV cards
currently, according to an April report from Aite Group.
Bank of America's cards will continue to include a magnetic
stripe so customers can use them in the U.S., and they will
continue to prompt cardholders to sign for their transactions, the
company said. Customers will be able to request chip cards in
branches and over the phone starting this week and online later
this year.
Visa and MasterCard have been making an aggressive push to get
U.S. banks and merchants to adopt EMV. The companies, which
contract with banks to issue their cards, in the last year have set
an October 2015 deadline by which U.S. merchants must upgrade their
checkout terminals to accept EMV cards or face higher
fraud-liability costs.
Banks typically pay for a large portion of costs that result
from card fraud today.
Discover Financial Services (DFS) and American Express Co.
(AXP), which operate competing payments networks, have recently
rolled out their own roadmaps that also include the October 2015
liability shift for fraud costs.
-Write to Andrew R. Johnson at andrew.r.johnson@dowjones.com
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