Navy Federal's McDonnell Pushing For Inclusion In At-Sea Debit Program

ARLINGTON, Va. – The $22 billion Navy Federal Credit Union is pushing to be included in a new program designed to use debit cards to make Navy ships cash-free. The Navy/Marine Cash program uses cards which are issued though J.P. Morgan Chase and Company. Lucinda Williams, assistant program manager for the Navy said that the Navy chose J.P. Morgan Chase because that is the agent bank for the U.S. Treasury, with whom the Navy partnered on the program. Brian McDonnell, CEO of Navy Federal, said that there had been an agreement between the Navy and the credit union that the program would include other financial institutions, but that the Navy had begun to roll out the program to 25 ships with the single issuer cards. “We’re trying to walk that cat back,” McDonnell said. According to the Navy, sailors and marines participating in the program split their directly deposited pay into a Navy Cash account administered by JP Morgan and an account with another institution, such as Navy Federal. Sailors and marines at sea then access that cash through a smart chip on the front of the card. McDonnell said that Navy Federal had made presentations to the Navy and the Financial Management Service (FMS), a bureau of the Treasury Department, about its capability to issue the necessary cards to participate in the program and said the credit union didn’t understand why the Navy had begun moving forward with the program using only one financial institution. But Gary Grippo, assistant commissioner with the FMS said the issue was not an unwillingness to work with other financial institutions, but some technical issues that needed to be worked out. “We are in agreement with Navy Fed that this system should have an open interface,” Grippo said, “we just have to work through the technical issues that allow that to happen.” From Grippo’s point of view those issues center on how to get money that a cardholder puts into their Navy Cash account, which J.P. Morgan Chase administers, into another account at the cardholder’s home institution in a timely manner. Grippo explained that currently the naval system is closed. Predetermined amounts are deposited onto members cards every payday and those amounts are accessible both via a chip on the front of the card while on ship and through a magnetic stripe on the back of the card at an ATM card on shore. And while a cardholder can move money from their Navy Cash account to their home account(s) using the Cashless ATM machines on ships, Grippo explained that, so far, that cannot be done quickly enough to justify having the cards linked to not only Navy Federal but the 2000 other banks and credit unions that, he said, serve Navy personnel at sea. “If a member wants to have money on his card available to use on shore leave on a Friday, he or she will not want a three-day delay in moving those funds,” Grippo explained. Grippo added that he believed the obstacle can still be overcome but said that it had not been yet and that the Navy had wanted to roll out the program and start saving money by not having to move as much cash back and forth to ships. He also clarified that the FMS has numerous financial institutions as agents in different program and that there was no obstacle in principle to Navy Federal taking on a similar role. However, there will still be obstacles. Even if Navy Federal could issue cards with the chip technology, which Navy Federal says it can, those chips would still have to be set up to meet the Navy’s onboard technical requirements. Navy Federal may be willing to take on the cost of issuing these cards because it has the most marines and sailors as members of any credit union or bank, but it is unclear whether others would be. “We will have to see if we can construct an open interface in a cost effective way,” Grippo said. -