Chip and pin system to be introduced

Travis Pantin

• Last Updated: February 02. 2009 9:30AM UAE / February 2. 2009 5:30AM GMT

Soon everybody will have another set of numbers to remember. In a move to thwart widespread credit card fraud, banks will start introducing a “chip-and-pin” system to replace the traditional magnetic security strip.

Chip-and-pin cards rely on a personal number, usually four digits, rather than a signature, and are thought to be harder to defraud. All banks will be required to introduce the new technology, according to a statement from the Central Bank yesterday, although no timetable was given.

“This is in line with global industry trends intended to reduce the risk of debit and credit card fraud. The introduction of such technology has proved to be extremely successful in other parts of the world in reducing card fraud, particularly in Europe,” the Central Bank said.

Chip-and-pin technology has been used widely in Europe for many years, and was introduced in Britain in 2004. There is still some debate about its effectiveness, although according to a British government website, counterfeit and fraud were reduced by nearly £60 million (Dh320.4m) the year after its introduction. Last week, a senior Dubai police officer told The National that its introduction could prevent increasingly sophisticated credit card fraud.

“In 2006, US$700m (Dh2.57 billion) in losses were produced in credit fraud and that has put a huge burden on companies,” said Major Gen Khamis al Mazeina, the deputy chief of Dubai Police.

Last year, security information belonging to bank customers was stolen, enabling criminals to withdraw money from local banks. Banking sources said the fraudulent activity had continued into the new year.

In response, the Central Bank commissioned an international firm to determine if there had been a breach in the electronic system that banks use to share information on cashpoints, called UAESWITCH.

The inquiry concluded that the UAESWITCH security system had not been compromised, the Central Bank said. It did, however, provide evidence that card security systems in the UAE need to be upgraded.

“As a result of this exercise the Central Bank decided to amend some of its protocols and introduce new ones,” the Central Bank said. “The safety and security of transactions through the UAESWITCH is of the highest importance to the Central Bank. The integrity of the system must be trusted by all participants.”

However, the Central Bank did not make it clear how the new technology would help prevent credit card fraud.

In August, the US Embassy warned citizens in the UAE about credit and debit card fraud that had affected an unusually large number of its employees.

One month later, banks sent text messages to thousands of customers warning them to change their PIN numbers. Since last year, there has been an ongoing government investigation into the matter, both in the UAE and abroad.

tpantin@thenational.ae