By Robin Duff
Visa and Mastercard have given the Middle East's banks an ultimatum: migrate to smartcard technology by December 2003 or cover your own fraud losses if you don't.
Representatives of Bull, recently in Dubai for Gitex, have warned regional banks that smartcards should become a central part of their business strategy immediately, not least because credit card issuers Visa and Mastercard have set an official deadline for migration to the technology.
The organisation responsible for raising awareness about the need for smartcards is the EMV Group, which was created in 1993 by the three main payment organisations in the world, Europay (EPI), Mastercard (MCI) and Visa. The group's aim is, essentially, to define common specifications for smartcard-based debit and credit card applications.
“The ‘Chip Migration Plan’ requires issuers to have replaced existing non-EMV-compliant Visa and Visa Electron chip cards by October 2002 in the United States and December 2003 for the rest of the world,” said Yassine Fergani, managing director, Bull. “From the beginning of 2006, the liability for fraud will transfer to the issuer, or acquirer, if they do not support chip cards.”
Until now applications for magnetic stripe cards have not provided any real security to the cardholder, as magnetic stripes can be reproduced very easily. As a consequence, fraud has become a critical issue over the last few years. Smartcards are considered to be very secure tools, in that the chip acts as a small, highly secured computer, which uses strong encryption algorithms like 3-DES or RSA.
“The use of smartcards for debit and credit applications is certainly a more efficient solution to avoid fraud,” said Fergani. “With magnetic stripe cards, POS terminals require, systematically, an online connection to obtain a bank’s authorisation. This process implies 2 disadvantages: the time required for the connection and its cost. If smartcards are used for debit and credit applications, the crucial part of the transaction is performed offline, which saves time and money.”