Stakeholders in the Kenya plastic money industry including MasterCard, regional card processor Paynet and global security printer De La Rue have launched a campaign in Nairobi dubbed "the great migration to EMV". The campaign 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 Kenya's Central Bank, 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 at over Ksh 4.06 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.
"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 nearly 15 per cent to 8.1 million cards. Card payments have rose by a significant 83 per cent to Ksh386.6 billion from Ksh211.2 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.
Stakeholders 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.
Paynet, for instance, has a fully functional Visa and MasterCard chip and pin card issuing and processing platform which offer banks a seamless and low cost way to upgrade old cards issued to customers while De La Rue has advertised local capacity to provide chip and pin card personalization services for banks. The two joined international card payment association Europay, MasterCard and Visa, referred globally to as EMV, in championing the new card platform in the region.
Speaking during the campaign launch, at a bankers breakfast event in a Nairobi hotel, MasterCard said Kenya had the opportunity to take a leap forward by adopting higher card security technologies that match up to the region's reputation for innovation and use of advanced technologies to improve life. "From an analysis of global trends, the region is lagging behind and along the way missing on an opportunity for continental leadership," said MasterCard East Africa's James Wainaina.
Nearly 70% of Europe's financial institutions and merchants have migrated to EMV chip and pin platforms while the Americas are fast taking up EMV chip and pin technology. "Chip and pin technology enhances the security of payment systems and provides better protection to issuers and acquirers against fraud as compared with traditional magnetic stripe cards and devices. It also enables a wider range of value-added solutions to bring about unprecedented opportunities to strengthen customer acquisition, drive revenue through increased card usage and new card acceptance opportunities," he added.
Mr. Wainaina said East Africa had the chance to ensure that it did not suffer the brunt of migrating fraudsters.
Magnetic stripe cards have been in use in East Africa by banks and merchants for nearly 20 years, and even longer in other parts of the world. Experts says that the technology in now highly susceptible to skimming and counterfeiting, which happens when a card is swiped through a magnetic stripe reader to record the information needed to use the card for payment. This stolen data can be written to another magnetic stripe card, effectively creating a duplicate that can be swiped to make a fraudulent purchase at an unsuspecting merchant.
De La Rue anticipates that chip and pin cards technology will drastically cut fraud in the region. "The new cards use a microprocessor installed in a chip embedded on the cards. This contains coded information needed to authorize payment through a multitude of protection features that makes it significantly more secure than a traditional magnetic stripe card," said Scott Atkins, Head of Sales at the company.
The stakeholders disclosed that international card networks Visa and MasterCard had already instituted "structural measures" to motivate banks and merchants in the region to migrate to the more secure platform.
The fraud liability shift structures will adversely affect banks that hold on to the weak security magnetic stripe cards. "This is one way that card providers are sending the message out. The industry is coming together to urge the region to move to this more secure card platform to enjoy benefits of a much secure payments space," said Mr. Matthewman.