Protecting the Consumer
South Africa’s credit card system is being upgraded as card issuers shift from the magnetic-strip credit card to the smart cards with embedded microchips.
South African consumers are demanding and very few are prepared to accept anything less than the best. The country is a world leader in terms of merchant penetration and there are few consumers that are not prepared to accept at least the most popular card brands.
Standard Bank has become the first major bank to embark on the widespread roll-out of chip-encoded credit cards and expects to have about 500000 in use by the end of June next year.
By the middle of October this year, 103000 cards had been issued and all the bank’s customers due for card renewals or replacements will now be supplied with chip-encoded credit cards that require a PIN number to be inserted before a transaction can take place.
The roll-out, which is governed by internationally recognised Europay Mastercard and Visa (EMV) standards, lays the platform for the eventual introduction of multi-application cards.
The cards have a magnetic strip and a chip, providing an extra layer of security for the bank, cardholders and merchants. In many cases cardholders will be required to insert a PIN number or provide a signature before a transaction can be successfully processed.
“At a functional level there is no difference for cardholders or merchants, except for the fact that PIN numbers must be inserted into card-readers,” said Carolina Reddy, director of card business services at Standard Bank, which has been working on the chip-card project for six years.
“For consumers, the major benefits are additional security and speedier transactions. For merchants and the bank the major benefits are enhanced security and more control over transactions.”
Chip-encoded cards have a set of counters alerting the bank to all offline transactions, no matter how low the value. This enables the bank to react to fraudulent transactions that have been processed below a merchant’s floor limit much more swiftly.
Unlike magnetic cards, chip-encoded cards cannot be cloned, reducing fraudulent transactions. ATMs are being upgraded to read chip-encoded cards.
The new cards meet strict security, certification and compliance standards mapped out by EMV and implemented and adhered to by card issuers in Europe and other parts of the world.
Reddy says that while chip-encoded cards are currently only equipped for single applications, the advent of multi-application cards should not be too far away.
“In a multi-application scenario, various debit, credit and other cards may be able to be incorporated into one card.
This will reduce the number of cards people carry in their wallets or purses and also expand the opportunities for a wide range of e- commerce transactions to be conducted from a single card,” she said.
Reddy added that chip-encoded cards carry no more personal information about card-holders than existing magnetic-strip cards, allaying fears in some quarters that chip technology would make unwelcome inroads into individual privacy.
“The overall intention of the launch of chip-encoded cards is to increase and improve security and not to change or interfere with the way people carry out their purchases or other card-based transactions,” she said.
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