New technology to fight card fraud

NAIROBI, KENYA: Kenyan banks are replacing the use of magnetic stripe technology in their ATM cards with chip and pin technology. The shift is intended to reduce fraudulent transactions, which were estimated to have nearly tripled to Sh1.6 billion in the first nine months of 2013, from Sh655.6 over the same period in 2012. The new chip and pin technology the banking sector is adopting relies on, like the name suggests, a chip inserted in the card that bears a user’s confidential information. The chip is heavily encrypted, making it much harder to clone.Further, it requires the use of a pin (personal identification number) instead of a signature in all instances, which improves transaction security. In countries such as France, the 2006 introduction of chip cards reduced losses to card fraud from Sh2.1 billion to Sh602.5 million. And since 2008, when migration to the technology was completed, no card cloning has been reported, according to France’s central bank, Banque de France. The technology Kenya is adopting will comply with the Europay, MasterCard and Visa (EMV) standard, which is also being used by countries in Europe, Latin America and Asia. “We cannot afford to be left behind because a weak system here is a threat to the entire global financial system,” said Mr Habil Olaka, the chief executive of the Kenya Bankers Association ( KBA). “We are proud that Kenya is currently one of the few countries in Africa that have adopted the EMV compliance standard, placing the country at par with other leading countries in enhancing fraud mitigation systems. By meeting the global standard for credit and debit card payments, our banks will be able to materially deal with the risk, leading to an increase in consumer confidence in using credit and debit cards.” According to KBA, by the end of April last year, more than 70 per cent of the cards in Kenya had been converted to chip and pin technology and certified EMV-compliant by Visa or MasterCard. To coincide with the issuance of the new EMV cards, banks in 2013 completed the upgrade of their ATMs and point of sale (POS) terminals to comply with the security standard. And with this, local financial institutions are expected to shut the door on the global network of data criminals and their collaborating hackers, phishers and “dumpster divers” who trawl banking systems, looking for loopholes that will enable them empty accounts.