Chip credit cards now in Sri Lanka

Chip credit cards which carries encrypted information and is in wide circulation in Europe is being touted as a safer alternative to the majority of credit cards that are currently in use in Sri Lanka. Trevine Fernandopulle, Deputy Chief Executive Officr of HSBC told The Sunday Times FT that HSBC started issuing the chip credit cards in October 2007 as a way to combat fraud which is a concern for consumers who have lost faith and confidence in using credit cards. "Fraud is not a big problem but it is a problem," Fernandopulle said. "It's small in percentage terms but it's big in value terms. On a huge volume in absolute terms, fraud can be quite significant. We have to prevent it from becoming a problem. We have to be ahead of the fraudster and we have to be ahead of the game at all times so that people will continue to use credit cards." Fernandopulle said the alternative to credit card usage is carrying cash which puts people in a more vulnerable position.

Around 90 percent of credit cards which are in use in Sri Lanka do not have the embedded chip but Fernandopulle believes that with HSBC issuing these new cards, it is only a matter of time before other banks also follow suit. "This is now an international standard and Sri Lanka wants to be among the international banks." He said it is still too early to tell if the chip credit cards have made gains in combating fraud. "There aren't that many in circulation as yet," he said. "The difference can be seen when most of the cards are converted."

Fernandopulle explained that the chip cards work on the same (swiping) machine as the regular credit cards. The only difference lies in the face of the card where a gold piece or chip (1.5" x 1.5") is embedded. He said he could not divulge the type of information that is in the chip for security reasons but that the encrypted material gets translated when it is swiped through the machine.

Another difference is that instead of using a manual signature, the chip card requires the consumer to punch in a PIN number, similar to what is used at ATM machines. The keyboard into which the PIN number is punched into is the size of a mobile phone. "The PIN number has to be committed to memory so the chances of being defrauded are far less." The chip credit cards issued by HSBC in Sri Lanka still does carry a signature on the reverse of the card because the local machines have not been programmed solely for chip cards.

Fernandopulle said the chip credit cards are extremely useful, particularly when consumers are traveling overseas. HSBC even advises their customers who are traveling abroad to get the chip credit cards because of the widespread use, particularly in the United Kingdom where they are very popular.