The Bankwatch

Tracking the consumer evolution of financial services

Posts Tagged ‘Debit cards

A chat with Dave Birch | whirlwind review of changes in financial services


Today I had the pleasure of a chat with Dave while he visited Toronto on business. Inevitably the conversation weaved in and around banks, payments, and what is wrong with both. As we chatted it is evident there is much change going on in the world of financial services, and that change may or may not be as expected. It appears banks are not innovating much anywhere at the moment as predicted, while on the payments front there is a host of activity and very different activity in many parts of the world.

This fits with my general theme of these times that innovation in banking will come from outside banks, and that banks will generally (not all) be relegated to a role of financial utilities. We spoke about the enormous challenge banks have to digest the mergers and takeovers which resulted from the banking crisis. The combination of mergers, new regulation, and concern for conservation of capital leads many banks down this path. Euro banks have the additional challenge of absorbing SEPA and the associated changes there which are neither easy nor cheap.

Innovation will come from non-banks, from payments providers, even credit card companies, and Dave was kind enough to provide some insight there, and show me some pretty cool stuff coming later this year.

Back to the topic of banks the one thing they generally appear to have grasped is the importance of mobile; they remain unsure how or what to implement, but mobile is important, so we can expect to see more work in that area.

Now off to read my newly autographed copy of the 2009 Digital Money Reader!

Written by Colin Henderson

July 14, 2009 at 14:10

6 years is too long for elimination of mag strip debit cards


We were just hit today with a case of fraud that affected my family personally, and it just validates my view that the security of our payments networks is a problem being swept under the carpet.  Every day, all banks contact thousands of customers to cancel their debit card because it was or may have been compromised.  This is a well kept secret, and has not made mainstream press yet.

In our situation we actually were the card compromised, and I know enough about the card usage to narrow down the location of the compromise which is why this one worrys me.  The compromise took place at a merchant, either a restaurant or a sporting goods store.  No ATM was involved so the compromise had to be a parasite POS terminal.

In our case the criminals used an ATM to withdraw cash shortly afterwards.  Incidentally thanks to our Bank for picking up on this event within a few hours and dealing with it.

logo_rbc

Chip migration offers hope but only after mag stripe is eliminated, and that is another 6 years off, even though chip cards are now being isued in 2009.  The entire POS terminal fleet in Canada could be replaced quickly if their was a will to do so.

Chip Migration plans | EMV Canada

Interac Association has established migration dates for cards and terminals. Complete card and ABM conversion is required by the end of 2012; complete point of sale (POS) conversion is required by the end of 2015. After 2015, Interac debit magnetic stripe transactions will no longer be accepted at devices in Canada.

and this from Interac

The chip transition timeline

Every Acquirer (or payment service provider) has its own timetable in place for providing chip terminals. In order to ensure a smooth transition, Interac Association has implemented final conversion deadlines that work within merchants’ normal business cycles, so that merchants will be able to transition to chip within the set timeline and with minimum impact.

  • Interac chip cards and terminals are already being rolled out across Canada.
  • Complete migration to chip technology will take several years and the timetable for the introduction of chip will vary from one financial institution, and one service provider to another.
  • All Automated Banking Machines (ABM), point-of-sale (POS) terminals and banking cards across Canada will be upgraded.
  • Magnetic stripe debit card transactions will no longer be accepted at ABMs after December 31, 2012.
  • Magnetic stripe transactions will no longer be accepted at POS after December 31, 2015.
  • Chip cards will continue to carry the magnetic stripe, not only to facilitate the chip transition period, but also to allow cardholders to use their debit cards in other countries that do not use chip technology.

Relevance to Bankwatch:

Chip cards are coming, but the timeline is unacceptably long, out of desire to keep merchants, acquirors and issuers costs down.

In Japan, debit has never taken off.  On the other hand Suica and Pasmo are very popular, and gaining outside the original use of train service only into convenience stores and other small purchase locations.  That includes beer, other alcohol, magazines and movie rentals.

The idea of leaving thousands of dollars in full view with a 4 digit number as the only key is insanity.

suica 250px-Suica

Suica is successful because its handy being a wireless swipe,  and low risk with small amounts stored.

Chip will introduce the security of a non copyable card (we hope), but the 6 year wait in Canada is going to be an unfortunate inconvenience for the thousands that are compromised and have to replace their cards.

Reaearch by Nobuyo Henderson

Written by Colin Henderson

June 20, 2009 at 20:35

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