Bank customers will soon be saying goodbye to those ATM cards which are in vogue now as they would soon be replaced by modern, high-security smart cards that can be used for multiple financial transactions.

The plastic money industry is making efforts to convince commercial banks to migrate from the traditional magnetic strip plastic cards to the more advanced chip and pin cards.

These new-generation cards are rather different because a microprocessor chip is installed in place of the black magnetic strip at the back of the cards.

The chip which contains encrypted financial data about the consumer needs the client to use a personal identification number (PIN) to complete a transaction.

The transition to the chip and pin card is being initiated by MasterCard, Paynet, and security documents printer De La Rue.

Analysts are of the opinion that banks will switch over to the new-generation cards as early as 2014.

Mr Bernard Matthewman, the CEO of Paynet Group, and e-banking provider and dealer in electronic card processing said that magnetic cards were being used in the country since a very long time. Their use first started with ATM cards and then were used for credit and debit cards.

Criminals are using modern technology to compromise electronic cards through a process called skimming. A consumer’s stolen card is passed through a reading device which captures data which is used to make a duplicate card.

The duplicate card is then used to withdraw money from the victim’s account. In the alternative, the criminals use the details skimmed off the card without making a new card.

Rapid development of technology in recent times have enabled fraudsters to move ahead of banks and financial services providers.

It was suggested that to boost security, the country needs to upgrade its card payment systems.

A study report released by Deloitte in August reveals that East African banks lost over Sh. 4 billion in the first six months in this year. Some banking experts suggest that the figure could be much higher as banks are reluctant to report fraud cases.

The migration to the more secure chip and pin cards is likely to save the financial sector billions of shillings in fraud related losses.

The timing for transition to the new card payment systems is considered by many as ideal due to the increase in number of consumers opting for card payments in their transactions.

Data from the Central Bank of Kenya shows that card payments rose by 83 per cent from Sh. 211.2 billion to Sh. 386.6 billion in the first half of 2012, while the number of debit cards issued grew by 15 per cent to stand at 8.1 million.

Stakeholders in the financial sector say that the increase in card transactions will also show a marked increase in fraudulent activities and more losses to the financial sector.

Mr Scott Atkins, the head of sales at security printers De La Rue, said that smart card based credit card payment systems have several advantages to the user as opposed to the conventional ones. One of the major advantages is restricting the chances of fraud as the unique information pertaining to the card is loaded onto the chip that is embedded in the card. The user unlocks this information using his PIN and the card can be used to either withdraw money or pay for goods.

It is more difficult for fraudsters to obtain this information compared to accessing it from a magnetic strip card. Apart from the increased security, the chip and pin cards enable consumers more control of offline credit card transaction approvals.

Consumers can also have the convenience of using one card for several applications, in the same way as having both a credit and debit card.

Mr James Wainaina, the MasterCard marketing manager for East Africa, said that this migration has been made necessary by demand from issuers, merchants, and consumers for stronger safeguards to secure card transactions.

He also said that card merchants who maintain their own systems will need to upgrade them and make the necessary operational changes to accept chip-enabled cards.

MasterCard, in collaboration with Nakumatt, has recently come out with Nakumatt Global prepaid MasterCard that is being issued to the retailer’s loyalty members. The card includes both EMV and MasterCard PayPass technology.

Barclays Bank has already begun issuing EMV-technology cards, with Family Bank and is preparing to replace ATM cards in its network with the modern cards.

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