Chip and PIN gains momentum

By Alex Kayle, Senior portals journalist

Johannesburg, 18 Mar 2009

MasterCard is driving its global six-month awareness campaign in chip and PIN technology to banks, merchants and customers, after revealing South African banks have issued in excess of one million MasterCard chip and PIN cards.

Despite the slow rollout of chip and PIN technology, it is now a reality in SA, said Dougie Henderson, VP of product sales, SA at MasterCard Worldwide. Speaking at a seminar held at the Hilton Hotel, in Sandton, he said: “As of the end of last year, we had in excess of one million EMV (Europay, MasterCard, Visa) compliant branded chip and PIN cards. We are now in a figure of in excess of 90% of the number of EMV point of service terminals that can accept MasterCard branded chip and PIN cards in the country. The acceptance of the technology is growing, and hopefully, the awareness driven by this campaign will assist with this.”

MasterCard and Standard Bank are currently in a pilot project with the Department of Transport to develop an initiative to roll out transport cards with embedded chip and PIN technology. Commuters could then use these cards to travel in a taxi, train or bus without having to buy a new ticket for every form of transport.

According to Henderson, chip and PIN technology greatly lowers fraud levels because it cannot be copied, unlike the magnetic strip from conventional credit and debit cards. He points out that after the introduction of the chip and PIN technology in the UK, fraud is now a third of what it was. In SA, one in five of every MasterCard branded cards now carry an EMV chip. One in four of all point-of-sale devices have been upgraded to accept these cards.

Fighting fraud

According to MasterCard, chip and PIN cards are more difficult to counterfeit than magnetic stripe cards, making them a powerful fraud deterrent. Chip-based payment systems have been adopted throughout Europe, as well as the Asia/Pacific region and parts of Latin America and the Middle East. EMVco, the company that manages the chip and PIN specifications, estimates there are now over 730 million chip cards in use globally.

Ronnie Herzfeld, chairman of the South African Retailers Payment Issues Forum, predicts that as tourism is expected to ramp up significantly, due to the 2010 Fifa World Cup, retailers are upgrading their systems and undergoing training in preparation of the flood of foreigners armed with chip and PIN cards.

Walter Volker, MD of the Payments Association of SA, says once the new payments system is working at full capacity, chip and PIN cards will be more than just a fraud deterrent. “The card's chip can store a lot more information than a magnetic stripe can. This enables the chip and PIN card to have many applications and can be used in banking/payments, loyalty programmes and promotions, access control, ticket buying, parking and toll payment, and transport payment.”

However, Volker notes chip and PIN technology will not completely replace magnetic stripe cards overnight. Chip terminals currently accommodate both forms of technology. “Chip and PIN cards will continue to incorporate the conventional magnetic stripe technology as other markets align their payment systems with the chip and PIN standard. MasterCard's long-term global objective is for all countries to use chip and PIN as the common method of cardholder identification and payment. SA is well on its way to becoming part of this movement.”