The cost of change seems to always go to the consumer, despite the fact that it will be saving the banks millions in stolen money - doesn't seem right does it?
Card fraud forces hi-tech changes
November 05 2006 at 12:11PM
By Eleanor Momberg and Jani Meyer
South Africans are to get new hi-tech credit and bank cards, as well as identity cards to fight rampant fraud. The country's major banks are planning to introduce chip-bearing credit and ATM cards, already available overseas, in the first half of next year, as a further step to protect customers.
Absa group head of payment systems Walter Volker said the introduction of the new cards was the biggest move of its kind ever undertaken on a global scale. The conversion process will involve the issuing of new cards to 16 million users. About 9 000 ATMs and 130 000 point-of-sale terminals will be upgraded at an estimated cost of R1,5-billion to R2-billion over a 10-year period. ATM conversions could cost up to R30 000 each.
'Credit cards are being used to fund other types of crime'
"This is going to be a gradual, phased-in process. Not all new cards will be issued next year," said Errol Smith, for Absa. He said smart cards were already being used by Absa clients receiving social grants from the government. Absa, First National and Standard banks said the cost to the consumer would be kept to a minimum, with the bulk of the expenditure being absorbed by the banks. FNB plans to issue the new cards to customers free. The new cards will be fitted with a microchip containing the cardholder's personal and bank information. It will be possible to store information about more than one account on a single card, which consumers will be able to use even if the banks go offline. Because the cards will no longer have magnetic strips, but microchips, and would operate with PIN codes, they would be more difficult to clone.
The hope is that this would contribute significantly to reducing bank-card fraud. While the police could not say whether card fraud was on the increase, annual statistics for the 2005/06 financial year show that 353 crimes involving counterfeit credit cards, valued at more than R16,8-million, were reported last year. A total of 520 credit cards, with a value of more than R12,6-million were stolen; and 429 crimes involving other bank cards, to the value of more than R20,5-million, were reported.
The South African Card Fraud Forum says credit-card fraud exceeds R50-million a year. Smith said Absa was ready to roll out the new cards, but was waiting for a number of point-of-sale connections to be upgraded, and for other banks to speed up their processes. Smith said the customer's first new card would be a hybrid with a magnetic strip and a microchip, so it could be used in countries not yet on the new systems. South African banks established a Europay, Visa and MasterCard (EMV) Forum in 1999 to co-ordinate the implementation of the new technology. Ben Duminy, project director of EMV, said it had gone mostly according to plan, "with some hitches at terminal (point of sale) level, as can be expected with new technology".
Smith said card fraud was a worldwide concern, but more prevalent in certain geographical areas. "KwaZulu-Natal is giving us headaches at the moment because that is where most of the crime syndicates are operating," he said. Jan Kleynhans, chief executive of FNB card division, said the bank would issue the new EMV cards as old ones expired. Kleynhans said most bank card fraudsters were also involved in other serious crimes. "Credit cards are being used to fund other types of crime. We found in the past year that there was more fraud on customer accounts where clients were victims of bag snatchings and smash-and-grabs." Gilbert Swats, Sabric CEO, said it was expected that EMV chip cards would provide a secure and user-friendly payment method for clients. "A drastic decrease in card skimming incidents, as well as counterfeit card fraud is expected." While the country's major banks are getting their act together with chip-bearing cards, it is unclear when the new ID cards using the same technology, mooted by the government for several years, will be issued.
Following a Special Assignment expose on ID corruption, Home Affairs Minister Nosiviwe Mapisa-Nqakula this week said green ID books must be replaced urgently because they had been contaminated by criminals. She was responding to questions in parliament regarding the apparent ease with which ID books could be obtained fraudulently from corrupt officials in the department. Mapisa-Nqakula's spokesperson, Cleo Mosana, could not say when the new ID cards would be issued.
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