Switching Your Sponsor Bank? Navigating the Complexities of BIN Migrations with Active Cards

June 12, 2024

Shawnet Hendricks
Head of Compliance

Transitioning to a new sponsor bank while maintaining active card programs can be daunting.
Whether you’re considering migrating the Bank Identification Number (BIN), or closing out a BIN and opening a new one with the new bank, you’ll want to understand your options and plan carefully so your customers can keep using your cards with minimal disruption.

When switching sponsor banks while having active cards and cardholders, you have two main options:

1. Migrate the Bank Identification Number (BIN)

• Migrate the BIN (the first 6 to 8 digits of a card number) to the new bank.
• This option allows you to maintain active card programs in the market.
• BIN migration is complex and requires careful coordination and adherence to regulatory requirements.

2. Close out an existing BIN and open a new one

• This means closing existing cards and issuing new cards through the new bank.
• Cardholders will need to update their card numbers with merchants.
• This process can be cumbersome and may lead to customer loss.

Despite its complexity, the first option — BIN migration — can be the best way to minimize customer disruption and avoid losing customers.

Key Considerations for a BIN Migration

Here are a few high-level considerations for planning and executing a successful BIN migration:

• Will the BIN migration require regulatory approval under the Bank Merger Act?
• Do you have support and engagement from your partners at the relevant card network?
• How will you and the banks handle post-migration transaction activity?
• How will you and the banks handle customer communications throughout the process?
• Are you prepared to update your marketing materials and customer agreements?
• How and when will you issue new physical cards?

We cover each consideration below.

Key Considerations—In Depth

Bank Merger Act Considerations

Under the Bank Merger Act, some BIN migrations might qualify as merger transactions between banks. If that’s the case, the bank acquiring the BIN may need approval from their federal banking regulator. The banks may also need to enter into a Bank Merger Agreement approved by a regulator. This agreement generally outlines the terms and conditions of the merger, ensuring both banks are aligned on the process. The exact requirements under the Bank Merger Act will depend on the situation.

Engaging with the Network

The payment card network will be a key stakeholder in your BIN migration. Engage with the network early to initiate the BIN migration request so that the applicable settlement endpoints can be transitioned to the new bank on your target conversion date. Network resources can be limited, and getting a network representative assigned to your project might take longer than expected.

Managing Trailing Activity

Managing trailing activity is the longest and often hardest aspect of a BIN migration. Your current and new banks must handle post-conversion transactions, chargeback recoveries, and other trailing settlements. Depending on the program type and size, this trailing settlement period can extend for six months or more.

• Ensure your issuer processor performs daily cash reconciliation at a client level.
• Consult your current bank in advance to determine their reserve requirements during this transition period.

Communicating with Cardholders

Effective communication with cardholders is essential during a BIN migration. Both banks should collaborate on the messages sent to cardholders, informing them of the upcoming bank change, the timeline of events, and any actions they need to take. Clear and timely communication helps maintain cardholder trust. Remember that regulators may have certain specific requirements for customer communications depending on whether the program is consumer or commercial.

Updating Marketing Materials and Agreements

Not all banks will support the same features, fees, limits, and functionalities. It’s essential to update all cardholder-facing materials, including the new issuing bank’s name, to reflect the new bank and its capabilities. Share these updated materials with the new bank for review and approval. A change in the issuing bank may be considered a material change, requiring you to give existing cardholders advance notice. Consult with your current and prospective bank for guidance and approval on what they consider a material change.

Issuing New Physical Cards

If your program has physical cards, one critical aspect of this transition is issuing new cards that reflect the updated bank information and network acceptance language while minimizing disruption. Here's how to effectively manage this process:

1. Agree on a Timeline: Both banks must agree on a timeline for issuing new cards with the updated bank’s information. This timeline should consider production, distribution, and communication schedules to ensure a smooth transition.
2. Communicate with Cardholders: Inform cardholders about the new cards, including activation instructions and the duration for which their existing cards will remain active post-issuance. Use multiple communication channels as needed (e.g., email, mail, phone calls) to ensure all cardholders are informed and prepared for the transition.
3. Key Components of Issuing New Cards:
   • Coordination: Work with the processor, network, and new issuing bank to ensure proper management and exchange of cryptographic keys for secure transactions.
   • Inventory Management: Your current bank may require you to destroy unprinted card stock. If your cards are made of materials other than plastic (like metal), the network typically needs to provide a waiver for their use because this can impact card functionality—and your new bank will need to work with the network to get this waiver.
   • Alternative Solutions for Unused Card Stock: Bank-Agnostic Card Stock Plan ahead to print the bank language during personalization instead of pre-printing it, making the card stock adaptable to any bank. Note that the new bank still needs to approve the card package.

Keep in Mind

• The card manufacturer might have additional requirements to support the program under a new bank.
• The new bank may not support the existing card manufacturer or may require additional due diligence, including assessments of manufacturing processes and security protocols.

By carefully managing these aspects, you can ensure a smooth and efficient transition for issuing new physical cards, maintaining the trust and satisfaction of your cardholders.

Conclusion

Migrating a BIN program between banks is a complex process that demands meticulous planning and execution. By carefully considering regulatory requirements, engaging effectively with payment networks, and maintaining clear communication with cardholders, you can navigate this transition smoothly. Thoughtful management of inventory, marketing materials, and new card issuance will help prevent delays and disruptions, ensuring the trust and satisfaction of your cardholders remains intact.