Smart cards conquer the Asia-Pacific region

THE cliché that "money makes the world go round" has some truth to it. Currency is vital in making economies work. It is still the best way to carry out the exchange of goods and services. A barter of specific goods such as that employed in ancient times would be too slow and primitive. And thus, an efficient innovation designed to facilitate trade in our contemporary world is the "smart card."

In 1974, French journalist Roland Moreno filed a worldwide patent covering the concept of imbedding a microcontroller onto a plastic bank card. Moreno’s vision was that one day, we would all carry a smart card, which would effectively be the electronic equivalent of the personal organizer, as well as function as an electronic bank manager. Other visionaries within the card industry accepted his concept with enthusiasm, and a series of technology trials have widened the smart card’s applications. Today, these applications range from e-commerce to the fight against global terrorism.

Among the major initiatives by the card industry was the establishment of an industry specification – EMV – in 1994. Europay, MasterCard and Visa (EMV) published joint specifications for global microchip-based bank cards (smart cards). This enabled all merchants to utilize one terminal at point-of-sale. Debit and credit card types were interoperable and interchangeable. What did this mean? Simply put, EMV made it possible for establishments to accept any card regardless of the issuer or brand.

The card industry has grown by leaps and bounds. At the Master Card Asia-Pacific Chip Card Update held in Kuala Lumpur on March 22, Shuan Gaidan, vice president of the Advanced Payment Systems for the Asia/ Pacific Region of MasterCard International, updated the Asian press on the progress of the industry. MasterCard International is a leading global payments solutions company that provides a broad variety of innovative services in support of its members’ credit, deposit access, electronic cash, business-to business and related payment programs. Malaysia is the standout performer in Asia/Pacific in the card industry, and is also one of the top performers in the world.

At the end of 2004, there were 225+ million MasterCard branded chip cards worldwide, majority of which are multi-application with value added programs. Thirty-one million were issued in Asia/Pacific region, and over 90 percent are EMV compliant. Majority of the cards are true multi-application cards with electronic cash, loyalty and ID functions, and there are approximately 300.000 EMV point of sale terminals.

MasterCard achieved significant successes and launched several initiatives in the Asia/Pacific region to accelerate smart card adoption in support of its overall smart card strategy. In the Philippines, Bank of the Philippine Islands launched a MasterCard Paypass pilot program in December 2004. MasterCard Paypass is a contactless payment feature that provides consumers with a simpler way to pay by tapping a payment card or other form factor, such as a phone or fob, on a point of sale terminal reader rather than swiping it.

In his talk at the Kuala Lumpur Hilton, Shuan Gaidan stated that there are regional chip rules. By January 1, 2006 issuers will have to be EMV-compliant, as the liability for all regional fraudulent transactions shifts to the non-EMV compliant party. In a nutshell, the cards will carry chips that cannot be counterfeited. This is good news for the cardholder, and proof that the chip works in combating fraud is confirmed by the Malaysian experience. To illustrate: As EMV transactions in Malaysia rose to 84 percent in February 2005, fraudulent transactions fell by 90 percent.

Last week, Philippine newspapers reported that charges of estafa were filed against the owner of a money changing shop in Manila, for duping the wife of the Kenyan delegate to the Inter-Parliamentary Union (IPU). By allegedly giving a low exchange rate for $500, the money changer managed to shortchange the complainant by approximately P13,000.

If you consider this news report alongside the fact that currency is one of the most widely-handled objects (and may harbor parasitic organisms such as Ascaris and tapeworm ova), it makes a lot of sense to use a credit card instead. Cards are more convenient and safe. By enforcing EMV-compliance MasterCard further ensures the security of its clients.