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Card fraud fight gathers momentum in Kenya

Kenya’s financial institutions are tightening measures to fight card fraud, with an increasing adoption of the more secure EMV chip cards.

Regional card processor and payments services firm Paynet Group is currently undergoing an upgrade initiative of its card issuing and processing platform to EMV chips cards its East Africa PesaPoint outlets.

The company has partnered with Family Bank to provide them with EMV cards, along with access to their extensive PesaPoint network.

Family Bank’s CEO Peter Munyiri acknowledged that card fraud, perpetrated through the magnetic strip cards, increased significantly in East Africa causing financial institutions to migrate from the strip cards to the EMV chip card technology, which uses a Personal Identification Number (PIN) to verify card transactions instead of a handwritten signature.

“Taking the lead with EMV Chip and PIN will go a long way in boosting the confidence of our cardholders by offering a more secure environment for card payments,” he said.

“The move will be important in growing the bank’s returns by minimising its losses through fraud and we hope that the introduction of Chip and PIN, which has enhanced security features, will greatly increase customer confidence and usage,” he added.

EMV cards are a joint effort between Europay, MasterCard and Visa (EMV) to ensure security and global compatibility.

The three companies initiated development of the EMV specifications in 1994 and the chip cards are more secure against credit card fraud compared to cards that rely only on data encoded in a magnetic stripe.

“Taking the lead with EMV Chip and PIN will go a long way in boosting the confidence of our cardholders by offering a more secure environment for card payments,” he said.

They can be used to secure online payment transactions and protect cardholders, merchants and issuers against fraud through a transaction-unique online cryptogram, they store considerably more information than magnetic stripe cards and a transaction-unique digital seal in the chip proves its authenticity in an offline environment and prevents criminals from using fraudulent payment cards.

According to a recent report by private firm Serianu Limited, cyber criminals are now focusing on paying shop operators to get key information from their customers’ credit cards which is passed on to fraudsters for no less than $10 (Sh840).

The report revealed that criminals are now stealing from Kenyans using this method because many financial institutions have no capability to detect when someone is using another person’s credit card and they also gain sensitive personal data by hacking into computer networks that store credit cards information.

Paynet Group CEO Bernard Matthewman pointed out the advantages of chip cards over magnetic stripe cards.

“The microprocessor embedded in a chip payment card contains the information needed to use the card for payment and a multitude of protection features, making it significantly more secure than a traditional magnetic stripe card,” he said.

“Magnetic stripe cards can be susceptible to fraud through skimming, where a card is swiped through a magnetic stripe reader to record the information needed to use the card for payment and the 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,” he explained.

In another recent report on fraud in the financial sector by Deloitte, it was revealed that various East African banks have lost approximately Sh4.06 billion since 2011 due to fraud, but the figure could be significantly understated due to the high number of unreported fraud cases.

Data from the Central Bank of Kenya (CBK) shows that the value of debit card transactions rose by 83.04 percent to Sh386.6 billion from Sh211.2 billion during the first half of this year, while the value of money transferred through mobile phones rose by 41 percent to Sh726.23 billion from Sh513.87 billion over the same time period.

The number of debit cards issued during the period has risen by 15 percent to 8.12 million from 7.07 million, partly due to the fact that commercial banks have been issuing the cards to almost all depositors who open accounts.

The value of money transacted through point-of-sale machines jumped to Sh46.99 billion from Sh25.88 billion over the same period, indicating that shopping using plastic money as well as internet transactions, which are also included in that category, is on an upward trend.

Credit cards are also becoming popular with transactions rising to Sh2.79 billion from Sh1.89 billion according to CBK, while the number of credit cards issued rose by 10.15 percent to 131,397.

Analysts note that besides the safety and convenience of cards, their uptake has also been helped by reward schemes, such as discounts that card providers offer to push up their use.

However, the rise of credit cards has been accompanied by an increase in fraud incidents and industry players are urging the government to put in place mechanisms to address the issue.

The Ministry of Information and Communications has proposed the Data Protection Bill 2012, which among other things will ensure that anyone collecting or storing confidential information to put in place security measures.

International card companies Europay, MasterCard and Visa have also been urging banks in East Africa and other card issuing institutions to migrate from the easy-to-counterfeit magnetic stripe cards.

On Tuesday, Paynet Kenya signed an agreement for the upgrading of credit and debit card using a new pin and chip technology system, dubbed ‘Prime 4′, which will be launched in November and will enable Paynet to issue the more secure Visa, MasterCard and prepraid debit and credit cards for its regional customer base.

By partnering with Paynet Group, Family Bank will soon begin issuing anti-fraud Visa EMV Chip Cards for the first time in Kenya and enable members to access their accounts in an additional 450 ATM’s across the country.

Family Bank card holders will be able to access their accounts from any PesaPoint ATM and PesaPoint member banks ATM network countrywide.

International card companies Europay, MasterCard and Visa have also been urging banks in East Africa and other card issuing institutions to migrate from the easy-to-counterfeit magnetic stripe cards.

“This gives our esteemed customers over 700 ATM’s to access cash from and if we include the Kenswitch network, our customers will be able to access their accounts from over 1,500 ATM’s countrywide,” Munyiri said.

“With the Visa EMV chip card, our esteemed customers will have access to 1.96 million ATM’s and over 13 million merchants worldwide where they can use their cards. They will also have the capability of online shopping for goods and services,” he added.

Matthewman noted that Family Bank’s addition to the network will push the number of unique PesaPoint locations to 910 from just over 700, and he added that the integration process to the PesaPoint network will be complete by the end of October, providing convenience and accessibility to Family Bank customers.

“Paynet will implement a range of new services on the Family Bank ATM network including M-Pesa ATM withdrawal, Visa and MasterCard acquiring, bill payments and prepaid airtime sales using the unique card-less withdraw system that we pioneered with M-Pesa,” he explained.

CapitalFM

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