Bank Identification Numbers (BINs) are the first six digits on any credit, debit or prepaid card. Whenever a cardholder transacts, the BIN helps the merchant processor identify both the type of card (Visa, MasterCard, etc.) and the institution that issued it, in order to approve or decline the transaction within a matter of seconds. BINs also enable merchants to accept multiple forms of payment including digital and mobile.
But the industry is facing a BIN shortage, thanks to the rapid growth of both the number of cards being issued and new forms of digital payment. In response, the two largest card networks, Visa and MasterCard, announced plans to expand the length of BINs from six to eight digits by April of 2022.
After the new 8-digit expansion is implemented, anytime a transaction occurs, the merchant’s card processing system will now read eight numbers instead of the first six. Every 6-digit BIN will automatically add two numbers at the end of the string (00, 01, 02, etc.) all that way up to 99. So essentially one 6-digit BIN will generate 100 different 8-digit BINs.
Three Major Ways the 8-Digit Expansion Will Impact Payment Card Issuers
- Licensing & Underutilization Costs – Currently, issuers pay licensing fees for every new BIN created. Which means that come April of 2022, the cost of one 6-digit BIN will increase with the new 8-Digit BINs that are automatically generated. At the same time, issuers are often penalized for underutilized BINs, which means those 99 extra 8-Digit BINs that aren’t actually in use will cost them extra. According to an analysis of VisaNet transactions, less than 9 percent of future 8-digit BINs are currently active.
- Higher Risk of Misrouted Transactions – Visa points out that the creation of additional BINs increases the possibility of misrouting or incorrectly processing transactions, which cannot be charged back to the cardholder.
- Administrative Challenges – BINs are essential for keeping track of cardholder information within a credit union’s portfolio. The creation of multiple BINs can quickly create an administrative nightmare for a credit unions, making it more difficult to monitor card issuance, activation or usage.
Four Steps Credit Unions Can Take to Prepare
While credit unions are not required to move to 8-digit BINs, both Visa and Mastercard strongly suggest they begin the potentially complex process of migrating. Here are four things credit unions can do to begin preparing for the 8-digit BIN migration:
- Initiate an Impact Assessment
Begin with a high-level impact assessment to analyze the following key areas: billing, reporting, user interfaces, application interfaces, enrollment forms or anything that currently uses the 6-digit BIN. You’ll want to be able to estimate the cost and resources needed to manage the migration and understand how these structural shifts will impact your systems and applications going forward.
- Consider Your PAN and Account Range Strategy
To implement 8-digit BINs, you’ll likely need to rethink your overall primary account number (PAN) assignment strategy. For example, if your credit union sets a random assignment of the PAN at the 7th digit of the account number, you’ll need to reissue those cards to accommodate an eight-digit BIN. If you utilize account ranges to delineate specific card products within your portfolio, that numeric structure may need updating as well.
- Develop a Plan for Reissuing Impacted Cards
Depending on your existing program structure, chances are you’ll need to reissue some cards. The sooner you can begin, the less disruption it might cause to your card portfolio as you can gradually reissue cards over their natural reissuance cycles.
- Talk to Your Business Partners & Vendors
Perhaps the most important step in the migration is initiating a dialogue with any business partners and third parties, including core processors and other entities that your credit union may utilize for various aspects of your payments strategy in order to understand what they are doing to prepare for the new BIN standard.
CO-OP is currently in the process of completing its own impact assessment on behalf of our credit union partners. Specifically, we are looking at:
- What infrastructure changes we need to make internally as well as how this will impact our credit unions, vendors and third-parties
- Establishing an overall plan, process and timeline for supporting our credit unions throughout this migration process
- Ensuring that we have identified all of our interdependencies so that our combined efforts are all fully aligned
“We are mobilizing our teams now to lessen the impact of the new standard on client credit unions and their cardholders,” said Heather McGuire, Senior Product Manager for CO-OP. “Working ahead will allow those credit unions that need to reissue cards with the appropriate eight-digit BIN characteristics to do so more gradually, ensuring program continuity while minimizing both costs and any disruption to cardholders.”
For more information on the 8-digit expansion, please contact your CO-OP Client Business Executive.
And as you’re thinking about your payments strategy, be sure to download our latest whitepaper, “How to Succeed in the Credit Card Business: A Blueprint for Credit Unions” which outlines how to build a credit card program that drives penetration, activation and usage.