The star News Online
Tuesday, January 23, 2007
South Africa's four big banks are to roll out microchip-embedded smart cards this year in a bid to fight fraud and grow a cashless society - encouraging consumers to make low-fee debit card payments for small purchases.
The country is the first outside Europe - which launched the technology over the past three years - to adopt the smart cards and among the "second wave" of countries, including Australia and New Zealand, to do so.
North American consumers have resisted the smart card as low fraud levels and high card volumes make the conversion expensive and unattractive.
The new cards will contain an "intelligent" microchip that, by 2010, will allow consumers to download movie and sports events tickets from the Internet, pay for public transport and make small purchases at the cost of a few cents. They will offer superior security facilities for Internet transactions.
Herman Singh, Standard Bank of South Africa's director of architecture and technology, said the migration would cost the industry R2-billion.
"In the future we will enable customers to download money at an ATM into a 'wallet' contained in the chip. For example, you will be able to go to a stadium in 2010, walk up to a vending machine, put your card in, buy your ticket, walk into the stadium and be able to buy a cool drink and absolutely everything that you want. There will be virtually no charge for those pocket transactions - maybe a cent. We are trying to encourage people to make small payments using their card," Singh said.
He said the technology would be in place for the bank's 8-million customers by 2008, with credit cards being converted first, followed by cheque and debit cards.
"We don't see any major charges or customer impact other than that customers will always have to use a PIN. The savings on fraud should minimise the cost of the cards and we will maintain charges as they are. The French experience saw an 80% to 90% reduction in fraud," Singh said.
The new cards will still have a magnetic strip as a "contingency plan" in the event of the chip failing and to ensure the cards' acceptance globally.
Data stored on the chip will include customer profiles and payment limits, and may include identity numbers and contact phone numbers. All card-based transactions that required only a signature will now be PIN-based.
Absa Group payment systems general manager Walter Volke said: "It's a new platform and you can build all types of applications on top of the platform. Chip technology is primarily far more secure and has extra memory capacity. It is different from the magnetic strip and has capabilities to do offline transactions."
Kobus van Deventer, head of strategy enablement planning at Nedbank, said the bank would also not charge additional fees for the new cards. - Staff Reporter