SA gears up for chip migration

Johannesburg, 09 Dec 2003

With SA on the brink of deploying chip-based credit cards, Mastercard outlines the plans for local roll-out.

"We are in project mode, and almost in deployment mode," says Gary Byrne, Mastercard payment solutions VP. "All the banks are far down the line, ensuring that the certification processes work. All the ATMs and POS systems in SA need to be upgraded with a smart reader, which is expensive as there are about 130 000 in the country."

The global standard for smart cards is known as EMV (an agreement between Europay, Mastercard and Visa) and credit cards making use of this technology can be used anywhere in the world.

[VIDEO]"There will be an interim period where some terminals will not be upgraded to read smart cards," says Byrne. "We will be keeping the magnetic stripe so that people will still be able to use their cards universally. With three fallbacks being the chip, the magnetic stripe and the numbers on the card, in one way or another, you`ll be able to make payment."

He says magnetic stripes will still be around for a minimum of five years, with South African banks required to have migrated to smart cards by 2005. "We have to ensure the new platform is pervasive before we start migration away from the old platform."

Byrne points to two projects currently under way that reflect the state of progress in SA. Standard Bank has launched its first smart card to its staff as the first step towards roll-out, and at Canal Walk in Cape Town a pilot project is planned for all banks to issue smart cards and shops to accept them. This will roll-out as expired credit cards are replaced in the banks.

He explains that part of the benefit of these smart cards will be the reduction of fraud. The signature-based verification model of the magnetic stripe cards wasn`t particularly effective, but the PIN number required by EMV cards is successful. The EMV card also cannot be counterfeited, a problem that was rife internationally with magnetic stripe cards. He says this issue has been persuasive in convincing retailers they want to adopt the technology, despite the fact that EMV cards are more expensive (R20 per card as opposed to R2) to produce.

"Big retailers with their own point of sale devices were initially reluctant to migrate, but with the introduction of the PIN verification, they have seen the security benefits and are now enthusiastic," says Byrne. "They also won`t need to keep the credit card slips as proof any more, because there will be an electronic record of the transaction."

The only real difference in experiences for end-users will be that they will have to memorise their credit card PIN. On the other hand, the benefits will be numerous. "Users will be able to load information, for instance their medical histories, onto their cards," says Byrne. "And it will only be a matter of time before people come up with applications to load onto smart cards. This is the first step to a smart card future."