Banks urged to adopt secure chip and pin cards

By Fredrick Obura

Central Bank of Kenya (CBK) has prevailed upon financial services provider to share infrastructure to boost the uptake of plastic money in the country.

 The regulator noted that banks were duplicating efforts in infrastructure development crowding places with same facilities such as automated teller machines (ATM).

CBK said if ATMs and other similar infrastructure were shared, the cost burden in transporting money to ATMs for instance would easily be knocked down and benefits passed on to the consumers.

“There are more point of sales and wider innovations targeting plastic money but the transaction cost is still prohibitive to many slowing adoption,” noted Stephen Nduati, the Central Bank of Kenya Head, of National Payment System. 

“Banks need to share infrastructure such as ATMs to check on unnecessary cost such as transport and pass the benefit to consumers,” he said. He said soon CBK will organise a workshop to prevail on the service providers on the need to share infrastructure to jumpstart government’s vision for a paperless economy.

 Speaking on the sidelines of plastic money stakeholder meeting in Nairobi, Nduati said CBK has lined up various strategies to improve use of cards in transaction within Kenya’s economy.

He said government services would be a major target in the plan with individuals soon expected to pay taxes, electricity, and water bills among other government services using cards.

Migration to EMV

 The announcement came as stakeholders in the Kenya plastic industry including masterCard, regional card processor Paynet and global security printer De La Rue launched a campaign encouraging banks to adopt more secure cards.

The campaign also known as ‘The great migration to EMV’ aims at encouraging Kenyan banks to abandon the old magnetic stripe platform used for ATM, credit and debit cards and instead issue their customers with new high security, multifunction chip and pin cards.

The move by the stakeholders, witnessed by officials from CBK, has been praised as the first joint effort by card networks and technology providers in the region to respond to the heavy losses incurred by banks and merchants through card fraud in the country.

A recent report by Deloitte on fraud in the financial sector estimated the losses by various East African banks stand at over Sh4.06 billion since 2011 to the first quarter of 2012. But stakeholders expressed fear that the amount lost by banks to card counterfeiters and skimmers in the region may actually be higher due to a high number of unreported fraud cases, with some banks reportedly concealing their ordeals to protect their image.

Fraudsters

“The risk of loss through card fraud is growing every day, more so because of the rising preference for plastic money payments by the banked in the region. Moving this kind of money on cards is attractive to cyber fraudsters, especially when magnetic stripe cards are used, which is why we are urging banks to move to the chip and pin platform to outsmart them,” said Bernard Matthewman, Paynet group CEO.

According to the Central Bank of Kenya data, the number of debit cards issued had grown by 15 per cent to 8.1 million cards. Card payments have risen by a significant 83 per cent to Sh386.6 billion from Sh211.2 billion during the first half of 2012.  “This growth should serve to remind senior bankers of the urgency to migrate to chip and pin to ensure a secure card commerce environment,” Mr Matthewman added.  Players told bankers that in spite of the technology newness to East Africa, the right investments were in place to ensure a cost-effective migration to chip and pin cards by banks.