US learns from Malaysia, 10 years later

KUALA LUMPUR, OCT 14, 2015: 

US has finally caught up with Malaysia in adopting chip security for credit cards – a move that Malaysia has led the world, to prevent fraudulent transactions committed due to the older magnetic stripe technology.

The chip-based security on credit cards is so secure that there has literally been no fraud with this technology, while magnetic strip cheating still goes on in much of the world today – a fraud risk the US is finally moving to address.

The nationwide change in the US took place as of Oct 1 with banks rolling out new credit cards (with chip) to customers, while retailers are also changing their payment terminal to enable EMV – Europay, MasterCard and Visa – payment tech.

But not all retailers are ready for the change by end-2015, especially not petrol stations since the tough guidelines for businesses to accept the new chip-based cards set by Visa Inc and MasterCard Inc don’t apply to American petrol stations until 2017.

That is definitely a big worry for the Americans because petrol stations are an easy target for those who want to make purchase using stolen card numbers, because it’s usually unattended.

Furthermore, almost half of the world’s credit card fraud now happens in America!

Malaysia went through the same situation some 10 years ago when it became known as the credit card fraud capital of the world. Many of the fraud cases then happened at petrol stations nationwide.

To address this huge problem, Bank Negara Malaysia announced the migration of swipe-based credit cards – and retailers had to hurry to change their card payment terminal to enable EMV payments.

However, the petrol stations here took about one year after the announcement to install EMV smart readers or terminals which can accept chip-based credit card payment at the pump.

MasterCard vice-president and senior country manager for Malaysia and Brunei, Jim Cheah then said the migration at petrol stations had to take some time because there were more than 6,000 petrol pumps that needed to be installed with the reader and terminal.

“Moreover, it needed to be done in stages as they (petroleum companies) would not allow outsiders to do it,” he said in July 2005.

Malaysia is also the first country in the world to completely migrate to chip-based credit cards two years after its implementation in 2005. Since then, the country has seen declining financial loss amounted from credit card frauds.

Bank Negara Malaysia reported that credit card fraud cases were lowered by 43.2% in the first half of 2005 alone. Prior to the EMV implementation, Malaysia’s financial industry suffered losses of some RM120 million from fraud cases.

Fast forward to 2014, the central bank said the most prevalent in credit card fraud case in Malaysia was unauthorised Internet transactions, which resulted in a loss of RM29.4 million.

Still, the amount of losses are still on the declining trend and transactions using credit cards are a lot safer than it was 10 years ago.

Hopefully like Malaysia, the US could finally see an improvement in its credit card security in the next couple of years.

Though they decide to make a change 10 years after Malaysia – well, better late than never!

The difference between chip-based and magnetic stripe credit cards

Every time a chip-based data is used for payment – typically by inserting the card in a merchant’s point-of-sale (POS) terminal, the chip creates a unique transaction code that can only be used once.

So if a hacker tries to steal the chip information from a certain POS and duplicate the card, it still couldn’t be used because of the different transaction number.

Meanwhile, magnetic stripe cards have unchanging transaction code, which makes it easier for hackers to duplicate the code by swiping the card on the payment terminal.

Hackers usually steal the code either through data breaches or using card skimmers that they have installed in places such as petrol stations and ATMs.

Flashback: Bernama story for 2005

Petrol Payment At Pumps Using Mastercard EMV Cards In Three Months

TAIPEI, July 13, 2005: 

Motorists can pay for petrol at the pump at more than 6,000 petrol pump islands nationwide using the chip embedded Europay, MasterCard and Visa (EMV) smart cards in three months’ time.

MasterCard vice-president and senior country manager for Malaysia and Brunei Jim Cheah said currently, only the petrol pump islands at the Petronas and Projet petrol stations are installed with the EMV smart card reader or terminals which can accept payment at the pump.

For other petrol stations, payment has to be made through the EMV terminal at the counter.

“I talked to the petroleum companies and they informed me that they are progressing well. We expect this exercise to be completed by October,” Cheah told Malaysian journalists at a two-day MasterCard International PayPass Seminar and Technology Fair here.

The use of the EMV chip-based smart card has helped to cut down on credit card fraud significantly.

While the Malaysian authorities had initially set Jan 1 this year as the deadline for the migration of the magnetic strip based card to the chip embedded EMV card, he said this was extended until the year-end at the request of the petroleum companies.

“This is because the migration would take some time as there were more than 6,000 petrol pumps that needed to be installed with the reader and the terminal.

“Moreover it needed to be done in stages as they (petroleum companies) would not allow outsiders to do it.”

Cheah said the petroleum companies have to invest between RM10,000 to RM15,000 to install a single reader at one petrol pump island with each petrol station likely to have eight petrol pumps.

“Malaysia is the only country in this region where they actually offer pay at pump service via credit cards. Therefore, we consider it as unique where you can pay at the pump itself.” 

Earlier, Cheah presented a paper on Malaysia’s success in migrating from the magnetic based card to the chip embedded EMV-compliant smart cards in just two and half years.

Malaysia was the first country in the world to completely migrate to EMV-compliant smart cards, a technology developed by MasterCard since 1994.

The success of Malaysia reducing credit card fraud cases after the migration of the magnetic to the EMV based card has paved the way for many countries in the region to seriously consider introducing similar EMV cards.

Cheah said that since the issuance of the chip based cards, fraud cases have dropped significantly by almost 96% within one year.

He attributed the success to the efforts by the industry and government to implement the chip migration following concerns over credit card fraud and security issues.