Guest Post By:Eran Feinstein
EMV credit cards, named for the three companies that originally developed them, Europay, MasterCard and Visa, were first introduced in France in 1992. Today, they are the global standard with over than 1 billion EMV credit cards used around the world. The cards feature embedded microprocessor chips that store and protect cardholder data to improve security and reduce fraud of in-person transactions, mobile transaction, and online payments.
The Current State of the Great MigrationBefore the global initiative to migrate to EMV chip technology, credit cards relied on magnetic stripes to store sensitive data. This created a vulnerability when criminals discovered they can skim the information from the stripe and use it to create a counterfeit card. The EMV chip is much harder to defraud because it relies on dynamic data. That is, each transaction carries a unique identifier which prevents the data from being reused, even if the card is compromised.
Kenya and the Great Migration to EMV ChipIn Kenya, banks are issuing more credit cards (In February 2015, about 11.5 million cards in circulation were susceptible to fraud) and consumers, especially those in the middle class, are completing more credit card transactions for larger sums; thus, between April 2012 and April 2013, approximately Sh.1.49 billion was lost to fraud. According to the Banking Fraud Investigations Department (BFID), show that of the money reported as stolen by financial institutions in the nice months to September 2012, less than half — Ksh460 million ($5.4 million) — was recovered following investigations. In the first 9 months of 2013, 484 cases of fraud were reported. Of those, 185 were successfully investigated and suspects taken to court. Forensic experts from Deloitte said the major causes of fraud were increased liquidity and weak controls in the banking sector, which make it attractive to fraudsters.
However, it seems that the number of reported cases is far from accurate as many times, when internal employees are involved, banks prefer internal disciplinary measures in cases involving thieving employees to avoid the reputation risk that comes with such cases going public.
The nation is poised for a disruption in the way credit card transactions are secured.
The Great Migration to EMV Chip in Kenya is expected to be the catalyst for this change. Led by the Kenya Bankers Association (KBA), Kenyan banks have issued consumers EMV Chip and PIN credit cards, as an additional layer of authenticity, in a concerted effort to protect sensitive payment data and reduce fraud.
Mobile Payments in the Age of EMVIn addition to transactions in which the credit card in processed at the merchant’s place of business, EMV cards are expected to increase the security of mobile payments and online payments and further expedite their adoption. With the new EMV cards, if data is compromised, a card becomes unusable. Dynamic elements within the transaction make data hard to counterfeit and makes merchants’ systems more secure.
The Current State of the Great MigrationAs of July 2014, Paynet, the regional card processor, reported that three banks are live on the EMV chip platform and have already replaced many magnetic stripe cards by EMV chip credit cards. Additional projects are nearing completion and they expect more financial institution to go live soon. Kenya Bankers Association estimate that slightly more than 50% of the 11.5 million cards in circulation have been replaced with EMV/CHIP cards to date.
Kenya is moving faster than many other companies, including the USA, in migrating to the new EMV technology.
The Next Stage of the Great MigrationToward the end of 2015, the next stage of the Great Migration to EMV Chip is expected in Kenya. By then, merchants or credit card issuers who do not support EMV technology will assume responsibility and liability for counterfeit transactions. This important guideline is prompting many Kenyan merchants to adopt contact chip terminals. Furthermore, it is expected that because chip cards and terminals will be harder to hack, fraudster activity will shift to those still using outdated magnetic stripe technology. The combination of industry standard and the reality of fraudulent activity makes adopting EMV technology a necessity for local Kenyan businesses.
About the Author:Eran Feinstein is the founder of 3G Direct Pay Limited - a provider of global e-commerce and online payments solutions for the travel and related industries He is a leading authority in the fields ofonline payments, e-commerce and travel, having acquired extensive experience from various parts of the world.