Even if it pushes the bank past the October 2015 deadline for EMV-chip card adoption, BMO plans to stick with its magnetic-stripe cards until each one reaches its natural expiration date.

Only then will each customer get an EMV-chip card, which improves security over magstripe through the use of an embedded chip that is resistant to counterfeiting. A portion of BMO's cardholders may still have magstripe cards after the 2015 deadline, but BMO has already issued more than 134,000 chip-enabled cards in the U.S., and 40% of its U.S. corporate card holders have obtained EMV cards at their request.

For the 60% of the corporate card holders that remain, BMO in will begin replacing all cards that expire, or are lost or stolen, with EMV cards next year. Through this process the balance of cards that do not have EMV will be migrated over the next two to three years, said Steve Pedersen, head of North American corporate credit card products at BMO Financial Group.

BMO, which provides corporate card, payment and treasury products, initially converted its entire U.S. Diners Club professional card portfolio in Nov. 2011. The bank has also long offered EMV cards to U.S.-based corporate customers with staff that frequently travel outside the U.S.  It's also converted 80% of its BMO Harris ATMs in the U.S., with the rest scheduled for conversion by the end of 2014.

If fraud becomes a problem, "we may choose to do an acceleration of card replacement," Pedersen said. "A lot of it will come down to how fast the retail community fully adopts Chip and PIN."

Many payment experts predict that merchants' EMV migration will not be complete by October 2015. Patty Walters, Vantiv's senior vice president of products and security, earlier this year predicted an on-time merchant migration was "unlikely." Philip W. Tomlinson, who retired as TSYS' CEO at the end of July, has also said the merchant migration would extend beyond the card networks' deadline.

BMO's experience in Canada—a fully migrated EMV market—was similar, Pedersen said. "You don't have universal adoption when the deadline hits," he said.

There should be an uptick in merchant adoption once it becomes clear the major retail chains have migrated, Pedersen said, and that should match BMO's card replacement pace.

"Every issuer can have every card out there but it still comes down to the terminals," he said, adding the cost of terminal upgrades is lowering, which will further spur adoption. "The cost is less of a barrier."

The bank's strategy is "interesting" and from a controller's perspective the math probably works, said Thad Peterson, a senior analyst at Aite Group.

"The challenge is that, while not all merchants will be converted by next October, a significant number will have converted, and it's likely that most of the larger merchants will be EMV by that time," Peterson said. "The long tail of merchant conversion appears to be with small merchants at this point."

Customer experience is also a concern, Aite's Peterson said. "If most of the larger merchants are encouraging EMV, and many, if not all of a customer's associates and friends are carrying and using EMV cards, and if several of the customer's other cards have been reissued with chips, what's my perception of EMV going to be?"

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