Chip cards ready to roll

By Iain Scott, ITWeb group consulting editor

Johannesburg, 17 Mar 2005

SA`s four biggest banks are poised to issue their new chip-based cards, but some are ahead of others.

Standard Bank looks to be the first to start rolling out the new EMV cards, with the group promising that new card holders will begin to receive them from May.

EMV (Europay, MasterCard and Visa) is the global standard for chip-based bank cards. The deadline for EMV compliance passed on 1 January, which means banks that have not upgraded to the standard are now liable for losses attributed to fraudulent transactions that might have been prevented had they been compliant.

"The bank has thousands of chip cards stock-piled and ready for processing and distribution," says Mike Olsen, head of Standard Bank`s card division. "In fact, we have been ready to issue smart credit cards since early 2004, but our progress has been impacted by the readiness of other players in the market."

Walter Volker, GM of Absa Group Payment Systems, says his bank has also been held back by the lack of readiness of some other banks, but will begin rolling out debit and credit cards towards the middle of the year.

"We started issuing them to staff last year, in June or July," he says. "The purpose was to iron out any hiccups. And we have continued to issue cards to increasing numbers of staff.

"We are behind on our original targets because we wanted to issue a few hundred thousand to customers last year, but some of the other banks` internals are not ready yet, and we are dependent on those internals."

Hurdles

Volker, who also chairs the South African EMV Forum and represents the Central Europe, Middle East and Africa region at the international body, says the biggest concern was that the point of sale terminals at some banks were not ready. "The software is not right, although the hardware is," he says.

"The clearing and settlement through Bankserv is also not quite right. So there are a couple of hurdles, but we are addressing them through the EMV forum."

First National Bank says while smart cards are expected to reduce fraud, it is taking a pragmatic approach to ensure customers gain tangible benefits.

"Due to the enormous cost of introducing smart card technology (a smart card is 400% more expensive to produce than the magnetic stripe credit card), we first want to ensure massive costs aren`t incurred for little additional benefit to our customers," says FNB Card CEO, Jan Kleynhans.

He says while the smart payment card is expected to be one anti-fraud solution, it forms a small part of an overall fraud prevention strategy at the bank.

FNB says it will introduce the technology in line with international guidelines and is conducting a small pilot, which will be followed by two end-to-end test phases with staff in April.

"FNB continues to introduce innovative products to make banking safer and more convenient than ever before for our clients. However, we will always temper our efforts by providing solutions that add real value to our customers," Kleynhans says.

Nedbank was unable to respond to queries by the time of publication. ITWeb is hoping to report soon on its status.