Financial Times

Smart chips to counter credit card fraud
The local credit card industry is gearing itself to implement 'smart chips' in credit cards in a bid to counter fake transactions. The chip cards, commonly known as smart cards, are credit cards that contain integrated circuits or 'chips' which give the card the ability to store and process data.

"These chips have considerably greater security than magnetic-stripe technology that is currently used, because the active elements of the credit card cannot be copied," Nirosha de Silva, Chairman, Credit Card Industry Task Force said.

She said the chips have far greater storage capacity than the conventional magnetic-stripe enabling credit card issuing companies to store personal data of the cardholder such as his medical history, loyalty programmes, insurance background, personal account transactions and travel information. The storage capacity of a chip is up to 128 kilo bytes as opposed to 220 bytes in the magnetic-stripe.

"Fake credit cards are manufactured through 'skimming' or extracting cardholder information from the magnetic-stripe by a device known as the 'skimmer', giving the thief all of the information he or she needs to create a counterfeit card," de Silva said. She said the chip in the smart card cannot be skimmed, and therefore is a strong security feature.

"Locally issued credit cards are prone to skimming in countries especially in the East Asian region and smart cards will counter this threat," Sarit Wijeyekoon, Manager, HSBC Credit Card Centre said.

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