Sam’s Club And Walmart To Offer MasterCard-branded EMV Cards

Wal-Mart Stores Inc. will be among the first retailers, if not the first, to offer store-branded credit cards with Europay-MasterCard-Visa (EMV) chips when its new cards bearing a MasterCard Inc. logo are issued this month.

That’s well in advance of an October 2015 deadline from the major card networks for U.S. card issuers, merchants, and merchant acquirers to be prepared for EMV, a 20-year-old chip card standard already well established in the rest of the developed world. By that date, liability for counterfeit card fraud will shift to the party not equipped for EMV. Gas stations have until October 2017.

Consumers who hold a Sam’s Club–branded card bearing the Discover Financial Services mark will receive the chip cards first, beginning June 23, says a spokeswoman for Sam’s Club, Walmart’s membership store division. The cards will be issued by General Electric Co.’s GE Capital Retail Bank.

Later this year, Walmart will replace Walmart-branded cards with chip versions with the MasterCard brand, the spokeswoman says. Walmart would not disclose the number of cards in the conversion. These cards, also issued by GE Capital Retail Bank, had carried the Discover Financial Services logo since 2005.

Initially, cardholders will be able to use the chip functionality at Sam’s Club stores this summer, and at most Walmart stores. Overall, more than 4,000 Walmart and Sam’s Club stores, including all 635 Sam’s Club locations, are ready and able to accept chip card transactions, Walmart says. They may also be able to use the chip function as other retailers activate their chip point-of-sale terminals. Each of the cards will still bear a magnetic stripe, enabling them for use at retailers that do not yet accept chip cards.

Walmart’s terminals will accept chip-and-signature verification at first. Eventually, cardholders will be able to make chip-and-PIN transactions with these cards, but not until the payment terminal applications are ready. That is expected in early 2015, a Walmart spokesman says.

Walmart executives have advocated in favor of chip-and-PIN as a cardholder verification method because they do not believe signatures to be as secure.

“As a company, Walmart has been very active in encouraging and asking credit card issuers and banks to get us to chip-and-PIN as quickly as possible for the security of our customers,” the spokesman says.

Issuers are free to select either cardholder verification method for their chip cards, with one argument for chip-and-signature claiming it will be an easier transition for consumers used to signing for a credit card purchase. Others, such as Walmart, prefer the PIN requirement.

While it’s important that Walmart is offering chip cards, the greater significance will be its promotion of their use, says Rick Oglesby, senior analyst at Double Diamond Payments Research. “They will obviously promote the cards and the use of its cards in-store so it represents a big opportunity for public exposure to EMV,” Oglesby says. That will make a difference when other issuers are trying to decide when they should start issuing EMV cards to the general population, he says.

“Walmart has long been pushing for EMV adoption in the United States, so it’s no great surprise that the cards they will be issuing will be EMV-ready,” Oglesby adds. “The company also has stated that they can be EMV-ready quickly in their stores due to their existing PIN-terminal infrastructure and experience with EMV internationally. So they are addressing EMV from both the issuing and merchant sides of the spectrum.”

He says the Sam’s Club cards, in particular, are geared more to the rewards features, which includes cash back on certain purchases up to $5,000 annually, than to getting consumers to switch to EMV. “Benefits are important parts of card offerings in general,” Oglesby says, “but I don’t think we’re on the verge of seeing a lot of EMV-specific incentive programs.”

Walmart is joining rival discount chain Target Corp. in accelerating the move to EMV payments. In the wake of the huge data breach it sustained last December, Target is retrofitting its stores with EMV terminals and converting its REDcard credit and debit cards to the EMV standard.