Trump Cards

Smart cards are the fast-approaching new billboards in your customers’ wallets

By Diane Jackson

Over the past few years, there has been a change in the way financial institutions view bank cards. Once seen as purely functional, it has become clear that a card with the right design and functionality can be one of a bank’s most powerful marketing tools. It is also an area where an institution can be innovative in a way that tangibly benefits the customer, making it a genuine driver of growth.

There are many possibilities to consider when choosing how to market your brand, including the use of smart cards (or EMV) and mobile banking. As you select the right technology for your community bank, you may also choose to apply rewards or loyalty points as a means of customer retention.

With the fast approaching—and inevitable—arrival of smart cards to the U.S. market, many community banks are considering smart card technology. Smart cards have either a contact chip (with 6 or 8 points) or a dual interface (chip and antenna). Contact chip cards have a tiny chip embedded in a standard plastic card that makes physical contact with a point of sales reader. A dual interface card can be waved over a terminal.

Your smart card may look like a normal credit card, but inside, it is completely different. Think of a smart card as a miniature computer: Both computers and smart cards have hardware, an operating system and use applications. A microprocessor is embedded under a contact piece that differentiates a smart card from a magnetic stripe card. The smart card is part of a system in which everything interconnects.

At the base of your system, there is a plastic card, which can be used at a point of sale terminal. The card is made up of a back-end system that consists of a network, application software (such as Java) and a key management system. Financial smart cards are protected by cryptography or a secure certificate, protecting the customer from fraud.

Implementation considerations

In Europe and Canada, where EMV cards have been rolled out, we’ve seen fraud levels fall. But there has been an increase in fraud online, and the industry is working hard to remedy this. The U.S. has also seen rising fraud rates. Banks are asking, ‘Are our fraud costs so high that we need to convert to EMV?’ The expectation is that they will migrate their customers over the next few years.

Mobile is also a major consideration. Big pilot projects are ongoing on both sides of the Atlantic, and impressive progress has already been made in emerging markets. CPI Card Group is heavily involved in the development of mobile banking applications, though it will likely take some time before the technology fully blossoms.

There are still big questions around security, and it’s still unclear as to who really owns the customer. Also, there isn’t yet the acceptance from a customer standpoint. Until that happens, the investment won’t be evident. Anything that expands the payments industry and gives more choice to the customer is good.

Take stock of your card design. Make sure the placement of the smart card chip will not interfere with your current design. This may be a great opportunity to give your current card program a full-body makeover. Remember, your payment cards are pocket-sized billboards and can make a lasting impression with current and potential customers. Make them top-of-wallet by conveying your community bank brand. endmark


Diane Jackson is director of business development and strategic marketing for CPI Card Group, an ICBA Preferred Service Provider of bank payment cards.