JP Morgan Chase and Co have announced plans to beat rivals Wells Fargo and Co in the race to bring credit cards embedded with microchips to their most affluent consumers.
Wells Fargo announced a plan to distribute chip cards later this year, but in an interview late last week general manager for Chase Card Services, David Porter said, “Absolutely, we would beat Wells Fargo to market.” The two banks are pitching to clients who have experienced difficulty in using credit cards when traveling abroad.
The EMV-chip technology has become standard in Europe and the rest of the world as it is so much more secure than the traditional magnetic strip used to store data on U.S. issued cards. Porter speculated that introducing chip cards could boost transaction revenue and allow Chase to lure affluent clients away from rivals such as American Express.
Clearly there are customers at American express that we would hope could benefit from this technology, and we obviously pick up more transactions,
Many European vendors will not accept cards which have only a magnetic strip and studies show that almost 10 million American consumers each year had experienced difficulty with credit card acceptance abroad. This causes an estimated $4 billion in lost transactions for merchants and $447 million in revenue for the card issuers.
America is one of the last developed nations who continue to rely primarily on cards with magnetic strips having so far failed to adopt EMV technology. An analyst at Goldman Sachs commented that:
Every transaction is vital; losing a cross-border sale at the point of sale because the card format is incompatible is just not acceptable.
Chase are intending to first issue chip cards exclusively to affluent customers. Consumers who hold the JP Morgan Chase Palladium credit card, which carries a $595 annual fee, will be issued with new chip cards no later than June. The remaining Chase branded cards will have chip cards issued a few months later.
Wells Fargo claimed that they plan to be the first major U.S. Bank to issue credit cards with EMV-chip technology and have invited 15,000 customers to use the cards in a pilot program scheduled to begin in the middle of the year.
The program will include frequent travelers and college students. Wells Fargo does not seem fazed by Chase’s intent to beat them to it by releasing chip cards first. A Wells Fargo spokeswoman, Lisa Westermann said,
We welcome competition and believe it’s good for the marketplace. Our first priority is helping our customers succeed.