Massive payment card upgrade has mixed result

Massive payment card upgrade has mixed result

Upgrading Australia's card payment system has been a slow process

Despite a years-long upgrade of Australia's payment systems, fraudsters are still profiting, leaving a questionable record for a vast program to equip debit and credit cards with new security features.

For several years, Australia has been transitioning to EMV (Europay, MasterCard, Visa) payment cards, which have a microchip with advanced cryptographic capabilities designed to deter fraud. The security changes are intended to reduce use of the black magnetic stripe on the back of the cards, which can be copied to create counterfeit ones.

The EMV system, developed in the mid-1990s, has been deployed throughout Europe and in some other countries. The system has been propelled by Visa and MasterCard in part by threats of new fraud liabilities, termed a "liability shift," for merchants and payment processors.

An investigation by IDG News Service shows the move to EMV in Australia -- a country with four major banks and a population of 22 million -- has been slow and missed self-imposed industry deadlines.

The situation could foreshadow difficulties with EMV adoption in the much-larger U.S. market, with a population of more than 300 million people and upwards of 6,000 financial institutions. While the move to EMV in Australia has resulted in declines in some kinds of fraud, other types have increased, with no clear reason why.

In June, the Australian Payments Clearing Association (APCA), a self-regulatory body that manages settlement policies between financial institutions, heralded an 18 percent drop in counterfeit card fraud in 2011.

Losses from counterfeit debit and credit cards fell from AU$40.84 million (US$42 million) in 2010 to $33.46 million in 2011, APCA said. But a closer examination of the figures, provided to APCA by banks and credit card companies, does not present such a clear-cut positive result.

Australia has a complex payment environment. There are debit and credit cards with and without the EMV microchip. Fraud figures submitted to APCA encompass payment cards issued within Australia as well as cards issued overseas and used in the country.

To arrive at the 18 percent decline, APCA combined the cost of counterfeit fraud for domestic Australian "scheme" cards, which bear the brand of companies such as MasterCard and Visa, with those of scheme payment cards issued overseas but used in Australia.

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