85 million ATM cards switched to chip cards: No more worries about losing money?

The State Bank of Vietnam (SBV) has just issued Circular No. 41/2018 regulating bank card operations, effective from February 18, 2019. One of the notable contents in this circular is that SBV has provided a specific roadmap for converting all ATM cards made from magnetic cards to chip cards (cards with electronic microchips).

Using ATM card

Specifically, there are currently more than 85 million ATM cards in circulation nationwide. According to the roadmap of the State Bank of Vietnam, over 25 million ATM cards will have to complete the conversion process to chip cards by the end of 2019. The deadline for converting all ATM cards in circulation on the market from magnetic cards to chip cards is the end of 2021.

Use chip cards to limit money loss

Many experts believe that it is necessary to accelerate the transition of ATM cards to chip card technology to increase security and limit the situation of consumers losing money in their accounts. Because recently, there have been consecutive cases of money being lost in ATM card accounts while the card is still in the pocket, especially at night.

For example, on October 20, 2018, Ms. Nga in Ninh Binh continuously received text messages about money withdrawals with a total amount of 19 million VND withdrawn while her ATM card was still in her wallet. Similarly, in just a very short period of time, two ATM card accounts opened at a bank of a customer were "evaporated" with a total loss of more than 200 million VND.

Although some recent cases of money loss were due to cardholders revealing their passwords, it cannot be denied that another important cause of customers' money loss is the quality of ATM cards. Accordingly, most ATM cards in Vietnam are still using magnetic technology, a technology with low security, easy to copy, steal data to make fake cards, hack, and withdraw money. Only some types of later generation cards apply chip security technology. Meanwhile, many countries in the world have long replaced all magnetic cards with chip cards with much higher security and safety.

“The sudden disappearance of money in accounts has caused me and many other customers to be really worried. Therefore, I think the policy of forcing banks to switch from magnetic cards to chip cards to increase security and protect customers' money needs to be implemented urgently,” said Mr. Tuan Minh (Tan Binh District, Ho Chi Minh City), a customer who regularly pays by card.

The biggest concern is the high cost.

Mr. Le Minh Huan, Deputy General Director of SCB Bank, affirmed that in order to convert from magnetic cards to chip cards, the bank does not encounter any technological barriers, because in recent years, banks have focused on investing in technology to ensure security and safety of cards for customers. However, the biggest difficulty is the high cost of converting from magnetic cards to chip cards. This is really a burden, especially for banks with a large number of card issuances.

“When converting cards, banks must upgrade their software to accept chip cards, ATMs, and card readers at payment acceptance points. Simply put, banks must spend money to upgrade their card acceptance systems, including ATMs and POS machines, to be compatible with chip cards. On the other hand, the cost of making chip card blanks is much more expensive than magnetic cards,” Mr. Huan analyzed.

Agribank representative also said that they are ready to convert magnetic cards to chip cards. “For us, the software system to upgrade magnetic cards to chip cards is basically ready. However, to implement it, there needs to be a suitable roadmap to ensure security and safety in card payments, while also taking into account the cost savings issue.”

Agribank representative also confirmed that the biggest cost in converting cards is the cost of making magnetic card blanks. Specifically, the cost of making ATM card blanks using magnetic cards is only about 1,000-2,000 VND/card, while the cost of making chip cards is up to 20,000-30,000 VND, equivalent to 1-1.5 USD/chip card blank.

“That means chip card blanks are 15-20 times more expensive than magnetic card blanks. However, despite the cost, this conversion is necessary for the safety of customers' card payments,” Agribank representative pledged.

Dr. Can Van Luc, a banking finance expert, said that for the transition to be smooth, the State Bank needs to complete the necessary legal framework for chip cards to operate smoothly. For example, there needs to be a set of standards for chip cards and banks should rely on that common standard to build.routeConvert, avoid the situation where each bank issues a different type of card, then have to re-synchronize, which takes a lot of time and money.

In addition, it is necessary to increase connectivity and use common technology platforms between banks. Because if each organization issues cards on a different technology platform, it will cause great waste. Moreover, some ATM cards of small banks can be used on the technology platform of large banks. "However, there must be clear regulations on sharing service costs to avoid the situation where when an incident occurs, one bank blames the other bank" - Mr. Luc stated his opinion.