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JPMorgan Pushes Microchip Cards in Race With Wells Fargo

JPMorgan Settles Military Mortgage Suits for $56 Million
JPMorgan will pay $27 million in cash to about 6,000 active-duty military personnel who were overcharged on their mortgages, cut interest rates on soldiers’ home loans and return homes that were wrongfully foreclosed upon. Photographer: JB Reed/Bloomberg

April 14 (Bloomberg) -- JPMorgan Chase & Co., the second-biggest U.S. bank by assets, said it plans to win the race against rival Wells Fargo & Co. to bring microchip-embedded credit cards to the wealthiest consumers.

“Absolutely, we would beat Wells Fargo to market,” David Porter, general manager for Chase Card Services, said in an interview yesterday, after Wells Fargo announced its plan to distribute chip cards later this year.

Both banks are courting U.S. clients who have encountered problems using their cards while traveling abroad. The EMV-chip technology, which is more secure than the magnetic-stripe that stores account data on U.S.-issued cards, has become a standard in Europe and much of the rest of the world. The chip cards may boost transaction revenue and help JPMorgan lure affluent customers from rivals such as American Express Co., Porter said.

“Clearly there are customers at American Express that we would hope could benefit from this technology,” Porter said. “And we obviously pick up more transactions” as some kiosks and vendors won’t take Chase cards with only a magnetic stripe, Porter said.

Almost 10 million U.S. consumers experienced credit-card acceptance problems abroad in 2008, costing about $4 billion in lost transactions for merchants and $447 million in revenue for card issuers, according to a 2009 study by Aite Group, a Boston-based research firm.

‘We Welcome Competition’

Wells Fargo said yesterday it planned to be the first major U.S. bank to deploy Visa Inc. credit cards with EMV-chip technology. The San Francisco-based lender plans to invite 15,000 customers to use the cards, beginning in the middle of this year. The pilot program will include frequent travelers such as private-banking clients and college students, the company said.

“We welcome competition and believe it’s good for the marketplace,” Lisa Westermann, a Wells Fargo spokeswoman, said today in an e-mail. “Our first priority is helping our customers succeed.”

Joanna Lambert, a spokeswoman for New York-based American Express, didn’t comment.

JPMorgan will first offer the card exclusively to affluent customers. Clients with a JPMorgan Palladium credit card, which has a $595 annual fee, will receive a chip card by June, the company said.

“Initially, we are targeting the technology to our highest-spend clients,” Porter said. “Months after that we will issue the card to Chase-branded products.”

‘Makes Sense’

Issuing chip cards to affluent travelers “makes sense” as new U.S. regulations, including pending caps on debit-card transaction fees, threaten to crimp bank revenue, according to John T. Williams, an analyst at Goldman Sachs Group Inc.

“Every transaction is vital,” Williams wrote today in a note to clients. “Losing a cross-border sale at the point of sale because a card format is incompatible is just not acceptable.”

The U.S. is among the last developed nations whose payment systems rely primarily on cards with magnetic stripes and haven’t yet adopted EMV. Standards for the technology are managed by EMVCo, which was formed in 1999 by Europay International, MasterCard Inc., based in Purchase, New York, and San Francisco-based Visa. AmEx, the biggest U.S. credit-card issuer by purchases, is also an EMVCo member.

To contact the reporter on this story: Andrew Frye in New York at afrye@bloomberg.net

To contact the editors responsible for this story: Dan Kraut at dkraut2@bloomberg.net; David Scheer at dscheer@bloomberg.net

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