Life & Work

Banks to adopt new ATM cards in fight against fraud

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Kenya Bankers Association chief executive officer Habil Olaka (left) and director of technical services Fidelis Mwaka during the launch of the ATM Safety Awareness campaign in Nairobi last week. Photo/Salaton Njau

Consumers are set to benefit immensely from the adoption of anti-fraud chip-PIN technology to be rolled out by all local banks in six months.

The good news comes as bankers, in consultation with Central Bank of Kenya (CBK), joined hands in an industry-wide approach which hopes to end banking fraud on automated teller machines (ATM).

Counterfeit

In the recent past, consumers have grappled with losses, caused by criminals who counterfeit ATM cards. The criminals place objects in the ATM slots (skimmers) and mimic card details which is later used to duplicate the card and fraudulently fleece the owner’s account.

Standard Chartered customers fell victim to the scam at the end of last year. They found anomalies, where withdrawals had been made from their accounts without their knowledge.

As a precautionary measure, the bank sent messages urging customers to change their ATM pin numbers. This turn of events, made bankers reconsider the expensive EMV (Europay Mastercard Visa) technology.

Secure

Last week, the bankers and Central Bank hosted a colourful function to announce their willingness to now comply with the standards. Together, they settled on a cost-sharing approach which will see all of them conform by end of September this year.

The technology is said to be a lot more secure than the current magnetic strip feature on ATM cards. The technologically advanced cards are fitted with a chip on its face for safety.

(Read: Kenyan banks plan new system to curb ATM fraud)

The details are encrypted in the chip allowing communication between the bank and the point of sale. It also keeps details on the transactions made.

But although it is the prayer of Kenyan Bankers Association (KBA) for banks to switch to the new system, consumers replacing their old cards for the Chip-Pin faced cards will still have the magnetic strip on the cards in addition to the chip.

This is because all ATMs are still non-compliant to the new standards. However, it suffices to say the magnetic strip will be a thing of the past once the ATM system is changed.

But considering only three Africa countries have complied with the standards- Kenya, Nigeria and South Africa, the magnet strips might remain on your card for a while. More so in the case of travellers who will need to access their accounts while away. Banks will spend Sh2.5 billion on the technology.

“A few banks have complied but we are not sure whether this is full compliance or partial. All we expect is that by the end of September all will have complied,” said KBA chief executive Habil Olaka.

Kaa Chonjo

Some of the compliant banks locally are Paramount Bank, Ecobank, Prime Bank and Standard Chartered. Ecobank has aggressively been sensitising consumers on the benefits of the technology and how it’s used.

Their reaction is in line with a banking sector campaign on safety spearheaded by KBA dubbed ‘Kaa Chonjo’. The initiative focuses on educating Kenyans on how to protect their PIN information at the ATM.

According to Mr Olaka, financial institutions need to improve systems and continuously engage customers, despite the adopting of the new technology.

The caution by Mr Olaka is likely to have been informed by bank-related fraud running into billions of shillings. Deloitte, a consultancy firm puts the figure in the region of Sh4.06 billion. Retailers are among users prone to card fraud. Nakumatt supermarket last year reported card fraud to be one of the biggest avenues for shrinkage in the industry. 

Retail shrinkage according to Nakumatt is stands at Sh3billion annually. Shrinkage takes place in the form of diversion of stock, shoplifting and undercharging at the till.

Supermarket loss can also occur through the following ways; price tag substitution, supplier fraud, customers sneaking unpaid items out of stores, cashier error and collusion between staff and third parties to remove goods out of an outlet’s inventory.

It goes to be seen if the new technology will shield retailers from losing billions from crooks, using fake or stolen debt and credit card at the point of sale.