For years, U.S. banks have mostly resisted pressure to shift to smart cards (credit or debit cards embedded with computer chips) that are widely considered more than secure than magnetic stripe cards, by saying the cards are too expensive to manufacture and merchant terminals in this country can't accept them anyway.
So when we saw that Citi is piloting cards that not only contain a chip but also contain a battery purported to last four years or more (as well as a card-programmable magnetic strip), we wanted to find out more about this high-end plastic and what the bank hopes to get out of it. Terry O'Neil, executive vice president of Citi's North America credit card division, spoke with us about the new cards on Friday.
The reason for the launch of the new 2G cards, which let customers use reward points at the point of purchase by pushing a button on the card itself before swiping through a terminal, is feedback from customers who wanted an easier way to redeem their loyalty points and "reward ubiquity," according to O'Neil. The 2G card, which is manufactured by Dynamics, can be used at any merchant terminal that accepts credit cards.
The program is geared toward customer retention. "Because we're providing our customers with millions of opportunities to redeem reward points or cash back, our card members will translate that into increased value in the card and prefer our card over other issuers because of the flexibility it provides," he says.
The pilot will begin November 15. O'Neil would not say how many customers will receive the card, nor how much it costs to make. "We're looking to learn how customers interact with the technology, what they value about the technology, what they like about the functionality, and what they want to see us do differently," he says. Once those findings are absorbed and adjustments made, the card will be rolled out to other customer groups throughout 2011.
Despite the chip and the battery, the card has the size and weight of a normal credit card, and mails out just like a regular credit card, O'Neil says. "It's completely ISO compliant and runs on all existing infrastructure," he says. There is a special fulfillment process for the card, however. Citi had to build a proprietary system to recognize and fulfill reward-point transaction requests, a project that took about ten months to complete. It also employee-tested the cards. The reward program catalog and call center still exist as they always have, the buttons on the new card are another avenue for redemption.
Among future card projects, Citi is exploring the use of EMV chips to secure credit card transactions, O'Neil says. "We have experience with EMV in other parts of the world and we intend to leverage that experience from other markets and bring EMV chip and PIN functionality to the U.S.," he says. The timing will be based on when customers express desire for such cards and when more U.S. merchant terminals are chip enabled. Citi will also be leveraging the 2G cards for other applications in the future, O'Neil says.