High security bank cards to replace contemporary ones

Bank customers might have to say goodbye to ATM cards which could soon be replaced by modern, high security smart cards that can be used for multiple financial transactions.

Stakeholders in the plastic money industry have launched a drive to have commercial banks migrate from the traditional magnetic strip plastic cards to the more advanced chip and pin cards.

The new-generation cards are different because in place of the black magnetic strip at the back of the cards, a microprocessor chip is installed.

The chip contains encrypted financial data about the consumer. To complete a transaction, the client will use a personal identification number (PIN) .

Migration to the chip and pin card is spearheaded by MasterCard, Paynet, and security documents printer De La Rue.

Analysts say that banks will adopt the new-generation cards as early as 2014.

“We’ve had magnetic strip cards in the country for quite a long time. Their use started in ATM cards then moved on to credit and debit cards,” said Mr Bernard Matthewman, the CEO of Paynet Group, an e-banking provider and dealer in electronic card processing.

Criminals have learnt to compromise electronic cards through a process called skimming. This is where a consumer’s card is stolen and passed through a reading device which captures data that is used to make a duplicate card.

The card is then used to withdraw money from the victim’s account. Alternatively, the criminals use the details skimmed off the card without making a new card.

Rapid developments in technology over the years have enabled fraudsters to move ahead of financial services providers.

Boost security

To boost security, the country should upgrade card payment systems.

A study by Deloitte released in August shows that East African banks lost over Sh4 billion in the first six months of this year.

READ: Kenyan banks biggest victims of Sh4.1 bn fraud

Some experts put the figure much higher as banks are reluctant to report fraud cases.

The migration to the more secure chip and pin cards is seen saving the financial sector billions of shillings in fraud related losses.

In addition, the timing for adoption of the new card payment systems is considered by many as ideal given the increasing preference of consumers to use card payments in their transactions.

Data from the Central Bank of Kenya shows that card payments rose by 83 per cent from Sh211.2 billion to Sh386.6 billion in the first half of 2012, with the number of debit cards issued growing by 15 per cent to stand at 8.1 million.

Stakeholders in the financial sector say that the growth in card transactions will also mean an increase in fraudulent activities and more losses to the financial sector.

Mr Scott Atkins, the head of sales at security printer De La Rue, said that smart card based credit card payment systems have several benefits to the user.

Key among them is limiting chances of fraud.

“Unique information relating to each particular card is loaded onto the chip which is embedded in the card,” he explains.

“The user then unlocks this information using his PIN and the card can be used to either withdraw money or pay for goods.

‘‘It is far more difficult for fraudsters to obtain this information compared to accessing it from a magnetic stripe card.”

In addition to increased security, chip and pin cards provide consumers more control of “offline” credit card transaction approvals.

Consumers can also have the convenience to use one card for several applications, in much the same way as having both a credit and debit card.

Mr James Wainaina, the MasterCard marketing manager for East Africa, said that migration has further been necessitated by demand from issuers, merchants, and consumers for stronger safeguards to secure card transactions.

“Merchants who opt to maintain their own systems will need to upgrade them and make operational changes necessary to accept chip-enabled cards,” he said.

“MasterCard, in collaboration with Nakumatt, recently announced the introduction of Nakumatt Global prepaid MasterCard to the retailer’s loyalty members.

‘‘The card includes both EMV and MasterCard PayPass technology.”

Already, Barclays Bank has begun issuing EMV-technology cards, with Family Bank getting prepared to replace ATM cards in its network with the modern cards.