ECONOMY

Smart cards to cut fraud

The use of smart cards, credit cards embedded with a chip, is expected to reduce losses due to fraud by some 700 million euros in Europe alone over the next three years, VISA Hellas executives said yesterday at the launch of a program, the chip migration plan, which is to prepare Greece for the adoption of this new technology. Fraud cases account for about 0.11 percent of the total sales volume in Europe, said Annika Karlsson-Hill, general manager for southern Europe at VISA International, the payment solution provider. The problem is more serious in tourist destinations such as Greece, Spain and Italy. Mediterranean countries have a higher fraud ratio than other countries because of the large number of tourists. Also, fraudsters find it easier to use fabricated cards in these countries, she said. Not only will smart cards help cut down fraud costs, they are expected to be more secure and more authentic than the current magnetic strip cards as users will need to key in a password identification number for certain transactions. According to Karlsson-Hill, the power and bigger capacity found in chips ensure better data quality which in turn allows for better authorization decisions and fewer chargebacks and disputes. Equipped with improved cardholder authentication and card verification methods, smart cards are expected to provide more secure and faster transactions. The chip’s ability to operate in a multi-application environment should open up new sectors to the users, paving the way for electronic commerce, electronic banking, ticketless travel, telephony services, loyalty schemes and electronic purse usage. VISA EU, the European arm of VISA International, plans to add chips embedded with EMV (Europay, Mastercard, VISA) and CEPS (common electronic purse specification) technology to magnetic strip cards during the transitional period to July 1, 2002. The conversion should be finalized by 2004 after which banks not using the technology will be liable for dubious transactions. Greek users should have access to smart cards in early 2002. Nikos Kambanopoulos of VISA International (southern Europe) said that VISA Europe has set aside 168 million euros to ease in the changeover. Banks and retailers will be given financial incentives to adopt the new technology while suppliers will be offered technical support.