Restacking the chips—pros and cons of EMV options.

January 26, 2015 Lynn Larson

Have you formed an opinion yet on the topic of chip-and-PIN versus chip-and-signature cards? Maybe you saw the recent news that many U.S. banks are leaning more toward the latter, which is less secure. I wondered about the reasons for this since other countries have already predominantly adopted the more secure chip-and-PIN. However, before diving in further, we cannot forget that any card with a smart chip and the EMV security standards is more secure than cards with only a magnetic stripe.

On the PIN vs. signature topic, I found some great insights in an article by Brian Krebs of Krebs on Security in which he interviews industry experts from Aite Group and Gartner Inc. I highly recommend you read it, but following is a summary of two key considerations at play.

Ease of Use

Chip-and-signature takes the lead, being quicker and easier to use at the point of sale. Chip-and-PIN requires the extra step of entering the correct PIN (personal identification number). If the cardholder forgets the PIN, he or she would need to pay a different way or abandon the purchase altogether. These are not good outcomes for the card-issuing bank or your card program.

Then there is the issue noted by Jack Jania, Gemalto Inc., during my 2014 interview with him: limitations of the current U.S. ATM infrastructure to manage card PINs in the field. Since the PIN is tied to the smart chip, it is not easy to reset. As a last resort, the bank might need to reissue the card, which is another hassle for everyone.

Protection for Lost or Stolen Cards

The advantage here goes to chip-and-PIN since a lost or stolen card would require a fraudster to enter the correct PIN in order to use it. With a chip-and-signature card, a fraudster could forge the cardholder’s signature at the point of sale and/or use the card at an unmanned kiosk or terminal.

Is it a gamble or good business decision for banks to go the chip-and-signature route? Probably a mix of both.

Given the above plus other nuances, each bank needs to decide what makes the most sense for its business. If you are an end-user organization, ensure you understand what type of card you have, requirements for usage, what could go wrong and how to resolve any issues.

For more on EMV, see the related webpage.

Related article: Banks Opting For Less Secure Signature Cards, January 6, 2015, PYMNTS.com.

About the Author

Blog post author Lynn Larson, CPCP, is the founder of Recharged Education. With more than 15 years of Commercial Card experience, her mission is to make industry education readily accessible to all. Learn more…

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Recommit to annual P-Card housekeeping tasks.

January 14, 2015 Lynn Larson

What is on your list of annual program management tasks? Have you documented them within your P-Card procedures? Making a conscious effort to complete the following 12 tasks annually will help keep your program in good shape. Of course, you might tackle some of these more often than yearly and in months other than January, especially if your fiscal year is not the calendar year. Nevertheless, the beginning of a calendar year marks a fitting time for a review.

Annual P-Card housekeeping clears the way for you to explore expansion opportunities.

“Housekeeping ain’t no joke.”

— Louisa May Alcott

Can You Add to the List?

If you have additional card program management tasks that you do annually, please share them within the Comments section below.

Number 13 Added!

The November 11, 2015, blog post adds one more task to the annual list: cardholder contact information. Learn more...

12 Annual Housekeeping Tasks

Revise P-Card Web pages and documents that reflect dated information, such as the schedule of transaction reconciliation deadlines for the year that cardholders must follow.
Ensure P-Card policies and procedures are current.
Execute mandated annual refresher training for cardholders and their managers.
Evaluate cardholder activity for the prior year to identify inactive or under-utilized cards.
Review the appropriateness of card limits and MCC restrictions. Too many temporary adjustments during the prior year to accommodate legitimate purchases indicate a mismatch between your controls and program goals.
Update your P-Card program risk assessment.
Publish key program metrics online, such as annualized process savings, and develop a 2014 summary specifically for management. Using graphs can be an effective way to share program status at a glance.
Consult with accounts payable regarding the potential need for a rebate accrual entry or adjustment.
Upload current accounting/budget codes to your P-Card program management system, if applicable. Some organizations pre-populate budget code drop-down menus. This allows cardholders to select (versus key in) the right codes, if different than any default codes, when reconciling transactions online.
Provide updated cardholder information for the organization’s business continuity/disaster recovery plan. If your organization does not require annual training on the plan, then consider sending an overview to cardholders and their managers as a reminder.
Assess your organization's relationship with the card issuer. Are there any unresolved issues? Are they meeting your needs? How can you improve the relationship? Confirm when your contract expires, so you are not caught off-guard. Plan accordingly.
Consider whether your organization could benefit from adding another card type, such as Declining Balance Cards (e.g., project/meeting cards) or Virtual Cards, to round out your payment strategy and address a pain point.

Annual housekeeping plus the type of goal setting for card program expansion that I mentioned in my last post will get the new year off to a great start.

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Reappraise the value of B2B card payments.

January 5, 2015 Lynn Larson

What will drive your organization to reduce its check volume in 2015 by adopting more card payments? A new year, or any time really, is a great time to instigate positive change. The trick is quantifying your opportunity first to garner internal buy-in. This will also help you evaluate the outcome of your efforts down the road.

So, what is your B2B card payments opportunity? In a blog post last month, AOC Solutions provided a striking example showing more than $400,000 in annual benefits. It used an organization who:

had 3,000 invoices/month, with half typically paid via check
switched half of the check payments to a combination of P-Cards and Virtual Cards

Do the same type of exercise, filling in the card metrics and related data specific to your organization:

process savings per P-Card transaction
average P-Card transaction size
average ePayables/Virtual Card transaction size, if applicable
average rebate percentage/basis points earned

If you do not have an ePayables program today, explore how (or whether) one would round out your payment strategy. Consider the 2014 status of your check payments to build goals for 2015. What percentage of your B2B payments do checks comprise? Enlist the help of your card provider to identify the best supplier candidates to migrate away from checks.

I cannot think of any good reason to continue making checks the foundation of our payment strategies. While checks will not go away any time soon in the United States, we sure can be doing more to change to more efficient electronic payments. Make 2015 a new year other than by just changing the calendar.

Leave 2014 (and checks!) behind. Make B2B card payments a priority in 2015. — Leave 2014 (and checks!) behind. Make B2B card payments a priority in 2015.

“The price of doing the same old thing is far higher than the price of change.”

— Bill Clinton

My Experience

As a P-Card program manager, I created an expansion plan centered on switching 10 key suppliers to card payments. This was exciting and manageable. Where I failed was in measuring the expansion results. What did we achieve in terms of additional process savings and rebates? Did we reap the expected benefits? What about the suppliers?

Even if you have, as I did, full management support to pursue expansion, which makes documenting the results less urgent, doing so can be inspiring. It might help drive similar positive change in your organization’s other offices/regions/districts. Whether you are launching or expanding a traditional P-Card program and/or Virtual Card program, a good plan—one that includes follow up activity—is important.