Eftpos terminals head to smartcard future

WELLINGTON (11/27/2003) - One of the country's largest Eftpos terminal companies says a mandated conversion to chip-equipped smartcards is going smoothly.

Provenco Group Ltd., formerly the Advantage Group, has already provided almost 3,000 terminals compliant with the EMV (Europay, MasterCard, Visa) smartcard standard to merchants, says Provenco chief John Tait. Most are simply cutting over as part of a normal periodic technology upgrade.

Mastercard, Visa and Eurocard have imposed a deadline of 2007 for all Eftpos cards worldwide to be compliant with EMV, which they developed jointly.

By delegating security to a chip, rather than the more vulnerable magnetic strip, the new card design is expected to make Eftpos fraud more difficult in many countries. New Zealand will comply substantially by deadline "even though we don't need it", says Tait.

"New Zealand has a fantastic PIN-based debit card system and expanding use of PINs for credit cards," he explains. "So we don't have a big fraud problem."

In countries such as the U.K., where a debit Eftpos transaction is accepted with a signature, the incidence of fraud is much greater.

In recognition of the greater protection, after the deadline passes liability for a fraudulent transaction will shift from the company issuing the card to the bank that processes the transaction. This effectively means more liability will fall on the merchant. Where a bank is issuing non-compliant cards, the liability will rest with that bank.

Tait expects all terminals to be converted before 2010. Non-compliant terminals will still be a risk after 2007, but a risk the issuing bank or the more advanced bank and merchants will have to accept, he says.

EMV-compliant terminals will be backward compatible with old cards and no more expensive for the merchant, says Tait.

Barry Halberg of the Retailers' Association doubts the smartcard will penetrate the market quickly. Merchants will have to weigh up the terms of contracts with their terminal suppliers carefully before deciding whether to shift.

On the question of increased security and the burden of responsibility for fraud, he says the association is embarking on a major campaign to reduce customer and staff theft.

If any merchants did feel pressured into unduly fast or uneconomic terminal upgrade by the EMV deadline, they would have raised the matter with the association, he says. "And to my knowledge, none have."

A bigger Eftpos question in merchants' minds, he says, is the fate of the two separate networks, one run by ANZ-owned Eftpos (NZ) and the other jointly by the other banks, when ANZ and National merge.

A spokeswoman for ANZ says it's too early in the merger process to give a definite answer to that question.

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