Life & Work

Banks adopt new technology solutions to tackle rising cases of ATM card fraud

atm

A customer inserts a visa card into an ATM. Financial institutions around the world have until 2015 to conform with international chip standards. Photo/File

Standard Chartered customers received SMSs during the recent festive season asking them to change their automated teller machine (ATM) pin.

Many were caught unawares, with some ignoring the message. Some customers were finding anomalies, where withdrawals had been made from their accounts without their knowledge.

Soon the social media was buzzing with the news with friends warning each other.

On December 24 StanChart, on its global Twitter account, said: “You can still use our ATMs in #Kenya. Your accounts are safe, but please change your PIN as a precaution. Call 32939000 for more info.”

Consultancy firm, Deloitte estimates bank related fraud in the region to be Sh4.06 billion. With the advent of technology, lenders fear they stand a greater risk of losing more.  

In an interview with the Daily Nation, Standard Chartered East Africa’s executive director, Kariuki Ngari, said card skimming is a vice that banks and other issuers have to contend with from time to time.

“Some of our customers have had this misfortune over the past couple of months and it has become more pronounced during the festive season.”

According to a notice on Diamond Trust Bank’s (DTB) website, criminals use gadgets known as skimmers which are inserted in the ATM so as to steal card details for the skimmer to develop a duplicate card and use it to withdraw money.

The alert is one of the initiatives being taken by banks to educate the public.

But how can banks effectively deal with card related fraud and safeguard their clients’ money?

After the Standard Chartered incidence last month, a debate that had faded out of the public glare, once again picked up.  The banks saw the need of adding voice to a campaign on security chip and PIN card technology rooted by payment service providers and money printing firm De La Rue.

“Definitely in certain ways, the chip technology is secure,” said I&M’s General Manager Suprio Sengupta.

I&M is set to roll out chip debit cards in the Tanzanian market this year, their customers in Kenya will have to wait a little longer due to the huge cost associated with making the card, said Mr Sengupta.

De La Rue, Paynet and MasterCard the three firms spearheading the chip/PIN technology campaign in the country agree that the transition is costly.

“It’s expensive and banks have to do a cost-benefit analysis on the gains. Even so, it involves major IT changes for both ATM machine and internal banking systems,” said De La Rue’s head of sales East and Southern Africa, Scott Atkins.

He is, however, optimistic that more banks will make the shift in the next 12 to 18 months.

Kenya Bankers Association chief executive Habil Olaka says the cost of installation is five times more what it costs to produce magnet strip ATM cards. 

Paramount Bank, Ecobank, Prime Bank and Standard Chartered are some of the banks that have introduced the chip technology.

A Chip -PIN card works like a deep reader ATM machine. It is inserted in a terminal and remains there until the transaction is completed. 

Instead of the magnetic strip, the newly technologically advanced cards are fitted with a chip which communicates with the Point of Sale (POS), for security.  Consumers have the option of using PIN or signature to make purchases. 

“The technology is a lot more secure. Information on the chip is encrypted making it impossible to skim,” said Mr Atkins.

The chip has enhanced data storage capacity allowing it to hold more personal details which is good for customers’ security.

Significant

He lauds the technology as a significant improvement and the way to go forward, since the world is also advancing with technology.  According to him, it will put a stop to criminals from developed nations who might want to take advantage of Kenyan’s robust system lagging behind in technology.

The chip-PIN card safety is its ability to authenticate user’s identity as well as record relevant transaction information.

On their website MasterCard says chip cards are also more difficult to counterfeit than magnetic stripe cards, making them a powerful fraud deterrent.

Online shoppers stand to gain more from this card technology. Most buyers have been reluctant to shop online for fear of security breach.

Although banks recognise chip-PIN technology is watertight, banks that have already complied are not forcing customers to switch.  On the contrary, account holders apply for the chip cards at will. However, the cards are not given for free, a small fee is charged.

Despite skepticism on cards, its usage has continued to increase as more Kenyans take on banking as well us use of debit and credit card for shopping.

Data from the Central Bank of Kenya shows a rise in card uptake and transactions in the country with current payments standing at over Sh380 billion.

Globally, financial institutions have until 2015 to conform with international chip-PIN/EMV standards, including Kenyan banks.