Chips ar­rive slowly

SA banks fi­nally start to get their act to­gether

Finweek English Edition - - Communication & technology - BENE­DICT KELLY

THE ROLL-OUT OF chip-based cards has pre­vi­ously caused dif­fi­cul­ties for South Africans trav­el­ling over­seas. That’s be­cause some mer­chants, un­aware of the rules con­cern­ing the use of the old-style mag­netic strip cards used by all banks in SA, re­fused to process trans­ac­tions.

How­ever, Wal­ter Volker, chair­man of the SA EMV fo­rum, which is co-or­di­nat­ing the ef­forts of SA’s banks to move to the new chip-based stan­dard, says that those teething prob­lems are a thing of the past and shouldn’t hap­pen in fu­ture.

Nick Es­same, head of busi­ness de­vel­op­ment and new tech­nol­ogy at Visa SA, says that banks have had to cover the risk as­so­ci­ated with mag­netic strip credit card fraud since early 2005, some­thing that Visa and MasterCard take re­spon­si­bil­ity for when trans­ac­tions are made us­ing chip-based cards.

Es­same adds that one chal­lenge will be to en­sure that mer­chants un­der­stand how to process the chip and pin cards and that some ed­u­ca­tion will be nec­es­sary be­fore a large-scale roll-out is pos­si­ble.

While chip cards have been used in­ter­na­tion­ally for a num­ber of years, SA’s banks are only now start­ing to in­tro­duce chip-based credit and debit cards to re­place the mag­netic strip­based cards now in use. The new cards – which use a chip very sim­i­lar to a cell­phone’s SIM card and which re­quire the user to en­ter a pin code in­stead of sign­ing to au­then­ti­cate a trans­ac­tion (known broadly as chip and pin cards) – have been rolled out broadly world­wide. How­ever, SA’s banks have been un­char­ac­ter­is­ti­cally slow to of­fer the new cards to clients.

Volker says that the de­lay in rolling out the tech­nol­ogy was mainly due to the banks not all putting chip-card roll-out on the top of their agen­das. “While some banks have been ready for years, oth­ers have been slower to put the in­fra­struc­ture in place to sup­port the new tech­nol­ogy. It wouldn’t have been vi­able to in­tro­duce the new sys­tem be­fore all the play­ers were ready.”

Volker, who’s also GM of group pay­ment sys­tems at Absa, says that the bank has be­gun is­su­ing chip-based cards but had re­stricted its ini­tial debit card only of­fer­ing to its Absa sil­ver pack­age clients. Absa’s lim­ited of­fer­ing started at the be­gin­ning of March. At the time of writ­ing it had only is­sued around 1 000 cards (with Absa hav­ing cur­rently is­sued 8m debit cards), mak­ing it the first SA bank to roll out the tech­nol­ogy out­side a trial en­vi­ron­ment.

Says Volker: “Once we’re happy that the mar­ket is ready for the tech­nol­ogy, then we’ll look at is­su­ing chip-based credit cards and ex­pand­ing the roll-out to other Absa pack­ages.”

Bar­rett White­ford, head of mar­ket­ing for FNB Card, says that the bank is in the fi­nal stages of de­vel­op­ment and it hopes to start test­ing be­fore third quar­ter 2007. Its roll-out would fol­low the nor­mal card re­place­ment cy­cle. How­ever, all new and re­place­ment cards would be chip-based once the roll-out started.

Absa first to move. Wal­ter Volker

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