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TMCNet: Latin American Banks Moving Rapidly to Smart Cards: News From Smart Card Alliance/CTST Conference

[May 19, 2008]

Latin American Banks Moving Rapidly to Smart Cards: News From Smart Card Alliance/CTST Conference

(Marketwire Via Acquire Media NewsEdge) PRINCETON JUNCTION, NJ, May 19 / MARKET WIRE/ --

Rapidly rising fraud rates due to
skimming of magnetic stripe credit cards and shifts in fraud liability are
fueling the migration of Latin American banks to smart bankcards based on
the global EMV standard, attendees learned at the joint Smart Card Alliance
annual meeting and CTST conference last week.

An important impetus is the chip liability shift program that protects the
party that has upgraded cards or terminals if fraud occurs, according Kim
Hangoc, vice president de Gesto de Produtos do Centro de Excelncia for
MasterCard Worldwide. The program is intraregional across all of Latin
America and has to do with liability for fraudulent transactions based on
skimmed (cloned) magnetic stripe cards. After January 2005, if a cloned
magnetic stripe from a chip-enabled bankcard is used on a non-chip enabled
merchant payment terminal, the acquirer is liable for the loss. If a
skimmed magnetic stripe card is used in a chip-equipped terminal, the
issuer is liable for the loss. In addition, a domestic liability shift
recently went into place in Brazil in March 2008, and is planned for
October 2008 in Mexico and July 2009 in Venezuela.

The banks in Brazil are in the middle of mass deployment, mainly motivated
by fraud, Hangoc said. They are using chip cards and requiring a PIN for
purchases, for both debit and credit cards. In Mexico the main motivation
is not fraud but differentiation, and no PIN entry is required for
purchases. Also the first MasterCard PayPass contactless card using the
EMV standard was launched at the end of 2006 in Mexico. Banks in Colombia,
Venezuela and Peru have started issuing and are in various stages of
testing or implementation. Banks in other countries in the regional
haven't started issuing yet but are preparing, he said.

In Brazil skimming and cloned card fraud grew at a 43.5 percent CAGR
between 2004 and 2006, according to Mario Mello, superintendente executivo
de cartes, Banco Real ABN Amro. His bank has already issued two million
smart bankcards and plans to double that number this year. One big plus
for customers is that if the stripe on a chip-equipped card is skimmed,
Banco Real can block magnetic stripe transactions on the card, but let the
customer continue to make chip transactions until the card is replaced.
More than 3,000 clients per month benefit from this service, improving
customer satisfaction, he said. Also the bank generates U.S. $12.5 million
per year incremental revenue from this service alone. Mello estimates that
28 percent of POS terminals in Brazil have chip readers now.

Banrisul, a large bank in southern Brazil issuing EMV bankcards, has cut
its fraud losses at chip-enabled merchant terminals to zero, according to
Jorge Krug, Senior IT Security Executive. Cloned card fraud on
chip-enabled cards is also zero, he said. In addition, Banrisul has cut
its Internet shopping fraud to zero on its chip cards, because the bank
implemented a "card present" PKI application for online payment for its
customers. In addition to the Banrisul issued certificate for online
banking, customers can obtain and use PKI credentials with Brazil's
national public key infrastructure, ICP-Brasil. ICP is the acronym for PKI
in Portuguese.

Mauricio Coelho, director of PKI for Instituto Nacional de Tecnologia DA
Informacao (ITI), said ICP-Brasil has already issued two million digital
certificates. The credential can be used for legally valid digital
signatures for conducting high value Internet transactions and certifying
electronic documents such as tax returns and payments; judiciary
proceedings; credentials for doctors, dentists and other professionals;
registry/notary signing; and other applications. As an indication of the
potential for PKI in Brazil, there are ten million citizens every day in
Brazil's 15,000 registry offices. By 2011, 1,000 of these offices will be

working with digital certificates, Coehlo said. ITI is a federal
organization and is the root Certification Authority for ICP-Brasil.

Mexico is also migrating to smart bankcards with the liability shift
effective on October 1, 2008, Carlos Avila, Operations Executive Director,
Banorte, told conference attendees. Banorte has issued 0.7 million EMV
credit cards out of a total of 1.3 million, and has equipped 30,400 of its
33,700 merchant terminals with chip, Avila said. The rest of the merchant
terminals will be upgraded by year end. He estimates that of the 16
million credit card accounts at six leading banks in Mexico, six million
have been upgraded to chip. The focus is on credit accounts, not debit,
since the majority of debit accounts are used for cash withdrawals and not
merchant payment, he said.

The Latin America track conference was organized by the Latin America
chapter of the Smart Card Alliance. The chapter is building a strong
industry alliance for collaboration, contributing to the accelerated use of
smart card technology in the region. More information can be found at
http://latinamerica.smartcardalliance.org.

About the Smart Card Alliance Latin America (SCALA)

The primary mission of the Smart Card Alliance Latin American chapter is in
line with the overall goal of the Alliance: to stimulate the understanding,
adoption, use and widespread application of smart cards. The Alliance
plans to use specific projects such as bilingual education programs, market
research, advocacy, industry relations and open forums to keep Latin
American chapter organization members connected to industry leaders and
innovative thought.

About the Smart Card Alliance

The Smart Card Alliance is a not-for-profit, multi-industry association
working to stimulate the understanding, adoption, use and widespread
application of smart card technology.

Through specific projects such as education programs, market research,
advocacy, industry relations and open forums, the Alliance keeps its
members connected to industry leaders and innovative thought. The Alliance
is the single industry voice for smart cards, leading industry discussion
on the impact and value of smart cards in the U.S. and Latin America. For
more information please visit http://www.smartcardalliance.org.

Contact:
Deb Montner
Montner & Associates
203-226-9290dmontner@montner.com

Copyright ? 2008 Marketwire

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