Why a Regional Bank Is Going With Chip-And-PIN for Its EMV Credit Cards

By Jim Daly

They’re few and far between, but another U.S. issuer, regional banking company First Niagara Financial Group Inc., has committed itself to issuing EMV credit cards of the chip-and-PIN variety. Buffalo, N.Y.-based First Niagara announced just before the U.S. EMV liability shift took effect that it will convert its entire 250,000 credit card portfolio to chip-and-PIN as well as its 900,000-card debit portfolio by early 2016.

Retailers are pushing hard for chip-and-PIN on credit cards, but issuers are divided. While most U.S. issuers are requiring PIN authentication with their new EMV debit cards, most also are sticking with signature authentication for credit cards.

Issuers’ oft-stated rationale is that cardholders are used to entering PINs with debit transactions, but not with credit. Plus, some issuers claim their processors don’t support PIN entry on credit transactions yet, or that the costs for implementing chip-and-PIN don’t outweigh the reduced fraud.

The EMV microprocessor generates a one-time code and effectively thwarts most counterfeit fraud, while the addition of PIN entry can stop lost-and-stolen card fraud—which isn’t as big as counterfeit fraud. The most prominent U.S. chip-and-PIN credit card proponent so far has been State Employees Credit Union.

But Justin Bigham, head of consumer product management at First Niagara, says consumers want to use personal identification numbers with all of their cards. He cites a MasterCard Inc. survey saying that 62% of consumers polled prefer PINs. “It’s the most secure form,” he says.

First Niagara carefully considered the argument that Americans aren’t used to entering PINs with credit card transactions. It concluded they could adapt, as have consumers in Canada and Europe, where chip-and-PIN authentication is common though not universal. One reason—most credit card holders also have a debit card, so PIN entry is not a foreign concept to them.

“We were very confident [that] the one con, a change in customer experience, we felt we could change-manage that,” says Bigham. A big part of that “change management” will come from an upcoming consumer awareness and education program by the company, which has about First Niagara Bank 390 branches in New York, Pennsylvania, Connecticut, and Massachusetts.

First Niagara tested EMV cards with about 50 employees for a month. While Bigham said employees are “somewhat biased” about payments, most transactions went quickly and smoothly, and there were enough merchant locations already live with EMV terminals that the bank concluded it could go ahead and roll out chip-and-PIN to its customer base. “The reception, the experience they had was very, very positive,” he says. Bigham himself made purchases at a Starbucks in Denver, at a Buffalo pizza place and Home Depot store, and at multiple stores in nearby Canada.

All of First Niagara’s credit and debit cards are MasterCards.