Visa is planning to accelerate the migration of chip and PIN in Australia as part of a five-year agenda to strengthen the country’s payments system.
Although levels of fraud in Australia are relatively low compared to other developed card markets, fraud has been rising over the past couple of years, but Visa says the move is also being driven by Australia’s migration from cash and cheques to electronic payments.
Visa said it will engage in discussions with Australian financial and merchant communities to set deadlines for the implementation of seven key security initiatives, the most notable of which is a move to 100 percent chip card issuance and PIN roll-out earlier than planned, which will see the elimination of signature verification for all domestic Visa credit card transactions.
“The time is now right to take advantage of new technologies and to strengthen the system,” said Visa’s general manager for Australia, New Zealand and the South Pacific, Chris Clark.
Fraud on the rise
Figures published by the Australian Payments and Clearing Association (APCA) show that payment card fraud on debit, credit and charge cards increased from A$0.23 ($0.15) to A$0.27 in every A$1,000 in the year from December 2006 to December 2007.
While debit card fraud dropped from A$0.077 to A$0.071, credit and charge card fraud (including signature and card-not-present) rose from A$0.36 to A$0.44 in every A$1,000.
The largest component of credit and charge card fraud relates to card-not-present fraud and cross-border fraud. However, Australia’s fraud rate remains low compared to other markets – in the UK, payment card fraud is equivalent to A$1.18 in every A$1,000.
Visa also wants all merchant terminals and ATMs in Australia to be chip-enabled and operational within the next five years, and for all Visa cardholders to be enrolled in Verified by Visa, the payment network’s online authentication system.
For merchants in particular, Visa wants those classed as ‘Level Four’ e-commerce merchants to ensure higher levels of data security protection, meaning merchants who process less than 20,000 Visa e-commerce transactions annually, and all other merchants processing up to 1 million Visa transactions annually.
Merchants of all sizes will also be urged to check the three-digit CVV2 security code (Cardholder Verification Value 2) on the back of cards.
These initiatives are aimed at addressing online fraud; lost, stolen and counterfeit card fraud; and identity theft. Since 2003, all new terminals in Australia have been chip-enabled and all of the major banks and several smaller institutions are now issuing chip cards.
Merchants warn on costs
However, some merchant groups, while welcoming anti-fraud initiatives, have expressed concerns that any implementation and upgrade costs will have to be passed on to consumers.
But according to Visa, the shift away from paper-based payments to card payments means that the move is inevitable, and that the costs associated with the migration to chip and PIN will be incorporated into banks’ business models – with these costs ultimately being offset by lower fraud costs.
MasterCard responded by saying that signatures still have an important role to play in the industry and should not be entirely abolished.