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Banks dash to roll out chip-compliant cards

FINANCIAL STANDARD
By Jackson Okoth | March 25th 2014

By Jackson Okoth

Kenya: The clock is ticking towards the May 2014 deadline when all banks are supposed to migrate their customers from the fraud-prone magnetic strip to chip technology cards.

When this deadline expires, banks that fail to migrate their customers to the chip platform will be liable for any loss of customer cash as a result of fraudulent activities.

This is according to the latest Kenya Bankers Association (KBA) bulletin on the banking industry’s migration status to the chip technology platform.

Migration to chip cards began in 2013 in a phased approach that has seen several commercial banks upgrade their Automated Teller Machines.

“All banks have reported to KBA that they met the September 2013 deadline of upgrading all Automated Teller Machines (ATMs); and the December 2013 deadline for the Point of Sale (POS) terminals. The final stage, and arguably the most complex, is the certification of Card Management Systems and replacement of all magnetic stripe debit and credit cards,” said KBA.

Logistical concerns

So far, most banks have completed the certification of their Card Management Systems and have started the card replacement process, with a number notifying their customers about the change.

As of last week, approximately 40 per cent of the card base had been converted to Chip and Pin.

However, card industry sources maintain that no bank has yet moved its entire customer base to the EMV (Europay, MasterCard and Visa)-compliant cards, owing to the huge costs involved in upgrading their systems and purchasing the required software and hardware.

There are also some banks that have complained about the KBA deadlines being too short.

“We have received feedback from some banks that are experiencing challenges in getting their cards issued, mainly due to delays in certification as well as logistical concerns around importing and personalising the new cards,” said the bankers’ association.

The list of those most affected are local banks that issue cards that are not Visa or Mastercard.

The cost of EMV certification varies from $6,000 (Sh519,000) to $10,000 (Sh865,000) per institution, while system upgrade costs are much higher, depending on the vendor.

A number of banks have had to outsource their card systems to third-party processors due to the cost implications, while others have had to procure completely new card management systems.

The new Chip and Pin cards are also more expensive than the old magnetic strip cards, with the costs  of replacing each card ranging between $1.80 (Sh156) and $3.20 (Sh277).

“We see a situation where approximately 70 per cent of the card base will be EMV-compliant by the end of April 2014. We expect the remaining cards will be replaced by the end of May 2014,” said KBA.

EMV Chip payment devices provide an additional layer of security that helps to significantly reduce card fraud.

“With the migration to EMV Chip, fraudsters will be unable to skim customers’ cards. There unscrupulous characters could now shift from counterfeiting at the customer’s end of the cards business to the data centre on the bank’s end.

“Banks will need to ensure their data centres comply with the latest payment card industry data security standards, which is another intensive and expensive process,” said Paynet Group CEO Bernard Matthewman.

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