Nedbank to roll-out smart cards

By Iain Scott for Nedbank
Johannesburg, 23 Feb 2006

Nedbank is to start bulk issuing of chip-based cards to its cardholders from the third quarter of this year, the culmination of a more than R200 million project that began in 2004.

Card Innovation head Joy Rees says the bank is running pilot projects ahead of the roll-out, with one pilot involving American Express cards and the other, larger pilot, around other cards.

Card MD Sydney Gericke says Nedbank has spent between R220 million and R250 million on issuing 20 000 new point-of-sale devices capable of reading the cards, installing in-branch machines and rolling out compliant ATMs.

Banks around the world are migrating from magnetic-stripe cards to smart cards to comply with standards laid down by card associations Europay, MasterCard and Visa (EMV). Europay was subsequently acquired by MasterCard.

The chip cards are inserted into readers and cardholders use a keypad to enter a PIN for authentication.

Nick Moore, head of consumer banking, says the primary objective is to reduce fraud, both counterfeit fraud where cards are physically copied, and fraud involving unauthorised use of another person`s card.

Gericke says it is estimated that chip-based bank cards will reduce the cost of counterfeit fraud by 70%.

He adds that the bank is also excited about the value-added platform provided by the chip.

"The experience at the till point will improve. The move away from signatures will shorten time at the till point, resulting in shorter queues and faster walkthrough. The chip also creates unique capabilities around driving new services, providing benefit for the retailer and the customer," he says.

Pieter Nel, senior manager of card innovation, says examples of value-adds that could be rolled out in future include custom-designed cardholder profiles, storage of loyalty points, fingerprint reading as verification, payments for small purchases from a "purse" loaded onto the card, and combination of two or more payment products - such as a debit card and a credit card - on the one chip.

Moore says Nedbank clients will receive their new smart cards as their cards expire, beginning in the third quarter this year. "There will be no new fees. Nothing changes," he says. "This has involved a tremendous amount of cost, but we believe the business case offsets the cost."