Race against time in ‘ PIN & PAY’ migration

> Credit cards lead debit cards in switch to personal identification number-based system by Dec 31

KUALA LUMPUR: With only two more months left to the end of the year, it will be a challenging task for Malaysia to meet the target for migration to personal identification number-enabled (PIN-enabled) payment cards, based on current progress.

Banks and non-bank issuers of payment cards are replacing signaturebased cards with PIN-enabled cards and are committed to completing the process by Dec 31.

Even as efforts are being intensified to meet the deadline, it is understood that only just over 50% of credit cards have been replaced so far and only 35% of bank-owned terminals can support the PIN system, known as “PIN & PAY”.

National Cards Group chairman B. Ravintharan ( pix) said the migration to PIN & PAY is progressing well, but pointed out that debit cards are falling behind credit cards.

“Debit cards (migration) are falling behind because customers need to go to a (bank) branch to collect (their new cards), while most of the credit cards are couried to customers. Customers don’t see why they should go to a branch to collect their new cards and, as a result, the conversion rate for debit cards is much lower,” he told SunBiz in an interview recently.

Ravintharan said meeting the yearend deadline for credit cards, however, should not be a problem as banks will courier the new cards to customers and credit cards holders just have to activate their new cards.

“Debit cards may be a challenge but banks are finding other ways to get customers to get the cards. Some banks are doing it online whereby customers don’t have to go the bank, while others have kiosks that are normally open during weekends and non-banking hours. Most banks have extended banking hours and some banks are also opening during weekends. Some have it done in shopping malls.

“Banks are doing all these initiatives and we’re also initiating heavily on social media, trying to get celebrities to encourage followers to have their cards replaced, especially debit cards,” said Ravintharan, who is also Maybank executive vice-president and head of cards for group community financial services/funding, deposit and bancassurance.

On point-of-sale (POS) terminals, he said one or two banks have completed the upgrading of terminals due to the smaller base.

The cost of upgrading of bankowned terminals is borne by the banks themselves while petrol companies will foot the bill of upgrading POS terminals at petrol stations, he said. Banks will work with merchant partners to coinvest in self-service kiosks.

“For merchants, the important thing is educating the cashiers. A lot of time and effort is spent by banks to educate cashiers, especially in department stores, hypermarkets and supermarkets because the turnover of cashiers is high and they need to be continuously educated. Some merchants need to go back three to four times to educate cashiers on how to use these PIN transactions,” said Ravintharan.

There are eight million credit cards in circulation and 20 million active debit cards that must be replaced by Dec 31, 2016, while non-active debit cards have more time, until Dec 31, 2017.

In Malaysia, Maybank has the highest card issuance in the industry with 1.7 million credit cards and 10 million debit cards. It is spending a significant sum on the exercise, and a big portion of it will be for card issuance. It is understood that a payment card costs RM11-RM15 depending on card type.

“It’s an expensive affair. We need to change all the cards and most terminals, we have to educate customers, incur the cost of the plastic, and couriering cards. Staff also need to work late because we’re open on weekends and afteroffice hours,” Ravintharan explained.

He said a terminal can cost RM500 (basic) to RM1,700 (contactless, all-inone) and the upgrading of terminals consists of a combination of software as well as replacement.

Contactless payment systems use near-field communication for making secure payments and the embedded chip and antenna enable consumers to wave their cards or handheld device over a reader at the POS terminal. Low-value contactless transactions (below RM250) do not require a PIN. Contactless payments are usually found in hypermarkets, supermarkets and fastfood restaurants to speed up queues.

“In Malaysia, 10% of the terminals are contactless and it’s growing but in matured markets, almost 80% of transactions are contactless. There will come a time in Malaysia when banks install the terminals and there will be more and more such terminals available and you’ll see more and more people using such devices,” said Ravintharan.

He said more terminals are being installed to promote electronic payment. Banks are installing terminals in merchant locations or segments which previously did not accept cards, such as fast-food restaurants.

Ravintharan said PIN & PAY has been widely used in the UK, France for about a decade, as well as in Canada, Australia and New Zealand. Malaysia is the first country in Asean to implement PIN & PAY.