Chips arrive slowly
SA banks finally start to get their act together
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