By Kate Fazzini and Emily Glazer
This article is being republished as part of our daily
reproduction of WSJ.com articles that also appeared in the U.S.
print edition of The Wall Street Journal (August 9, 2017).
J.P. Morgan Chase & Co. has quietly canceled a popular
program that allowed customers to replace lost debit cards at many
of its 5,300 branches, responding to factors including an uptick in
fraud, according to people familiar with the matter.
The change means that customers who lose their debit card or
have it stolen will have to wait for a new one to be mailed to
them.
J.P. Morgan had machines to make the cards in about half of its
branches, according to one of the people. That would be about 2,650
locations. The bank started eliminating the service in March, and
finished late last month, the people said.
Other banks have also faced problems when expanding new
financial technology. For example, some banks have placed more
restrictions on mobile check-cashing technology to cut down on
fraud, like longer wait times for a deposit to post and dollar
limits on daily deposits.
J.P. Morgan was one of the first major lenders to introduce
instant-issue debit cards in branches, touting the service in a
2012 news release as "a real time-saver for our customers." Since
then, a cross-section of national, regional and local banks and
credit unions have introduced the service, which is often used to
quickly replace the cards of customers who may have been the victim
of a retail data breach.
Around two years ago, J.P. Morgan's Chase branches began to
experience a jump in people coming in with fake IDs that matched
customer information such as name and birth date, some of the
people familiar with the matter said.
The swindlers then requested new replacement debit cards on the
spot, the people said. They could use the new card made in the
branch to make purchases or withdraw an unsuspecting customer's
money from a teller or the bank's ATM. New pins are set for new
cards.
After bank officials started noticing the problem picking up,
Chase started requiring customers to produce the same form of ID
they had used to open their account, such as a driver's license or
passport.
"We found the issue and fixed the process almost two years ago,
virtually eliminating the issue," said bank spokeswoman Anne
Pace.
The more-recent decision to discontinue the service reflects
numerous factors, she added, including a fresh push to cut costs
and customers increasingly migrating to other payment options, like
mobile banking. Ms. Pace said the fraud issues covered less than 1%
of all consumer-related fraud at the bank.
Not every bank agrees that these types of machines pose a
security risk. TD Bank and PNC Financial Services Group Inc. still
offer instant-issue debit cards, publicizing them as a way to get
cards replaced faster. Companies that produce the instant-issue
technology also have said it is as a way to reduce theft through
the mail.
A PNC spokesman said the service is "extraordinarily popular
with customers."
In May, TD Bank released a new ad touting its instant-issue
cards. In the ad, a young woman leaves her wallet in a taxi, walks
right into a branch, and has her card replaced instantly.
As of March, TD Bank had rolled out machines to produce
full-function debit cards for all its U.S. retail locations. "We
have not seen an increase in fraud related to these machines," said
TD Bank spokesperson Lauren Schmidt.
Other big banks, like Bank of America Corp., Citigroup Inc., and
Wells Fargo & Co., offer temporary replacement debit cards in
some branches, in part to reduce the possibility of fraud. J.P.
Morgan is now offering a temporary ATM card at the branch, but not
one that can be used as a debit card at merchants.
Some bank customers questioned J.P. Morgan on Twitter with sad
or puzzled emojis after Chase removed the service. "Chase really
lost me with that one," complained one customer, Diron Gipson, last
month. "I need my debit card the same day! Not 5 days later."
J.P. Morgan offers rush delivery of a new debit card that takes
two or three days, but that can also carry a $5 fee.
Financial institutions using the technology are forecast to grow
by about 65%, by 2021, according to a June report from research
firm Aite Group.
Still, others have voiced concerns besides J.P. Morgan. Entrust
Datacard Corp., which manufactures the machines that the bank used
in branches for the instant debit replacement cards, co-wrote a
2015 white paper that advised companies using the machines to
"tighten know-your-customer protocol," while "training employees to
recognize in-person fraud schemes."
(END) Dow Jones Newswires
August 09, 2017 02:47 ET (06:47 GMT)
Copyright (c) 2017 Dow Jones & Company, Inc.
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