Deadline looms over new Eftpos terminals

Slow uptake of new international-standard Eftpos terminals is increasing concern that retailers will face a greater risk of fraud after the new year.

The new international EMV credit card standard, derived from Europay, MasterCard and Visa, aims to raise the level of card security and to reduce fraud.

Eftpos network operator Electronic Transaction Services (ETSL) and banks Westpac, BNZ, ASB and National Bank have set a deadline of January 1 for their retail customers to swap old terminals for new chip card readers.

Computer chips imbedded into cards contain complex algorithms designed to thwart fraud, which according to local terminal supplier Provenco Payments, cost more than $1 billion in Britain in 2003.

John Tait, Provenco Payments chief executive, said there are no fraud statistics for New Zealand but when EMV was implemented in Malaysia this year, fraud fell from 80c for every $100 to less than 5c.

Fraudulent activity, he said, could migrate to friendlier, non-EMV compliant countries.

Tait said retailers failing to upgrade by the deadline risked losing their terminal connection.

"That's what we've been told by the ETSL banks."

He estimated 20,000 terminals needed changing nationwide but said the industry could only handle about 3000 installations a month - a shortfall of 5000.

With some retailers apparently in no hurry to make the change, this picture is going to get worse, he said.

"We just need people to start to listen to the message and start to acknowledge that it needs to be done."

He said the cost of renting the new terminals was about the same as the old ones, about $15 a week, so price should not be a barrier to upgrading.

David Taylor, head of specialist sales at Westpac, said 20,000 terminals nationwide "sounds a larger number than our figures suggest".

Taylor said there would not be a blanket switch-off of terminals on January 1.

Continued use of old machines may be allowed if retailers demonstrate a plan to migrate to new technology.

He said dispensation would be granted on a case-by-case basis, otherwise "the retailers will continue to use the old terminals and they [could] get hit with a major fraud that could topple them over".

He added that retailers granted dispensation to continue using old terminals could wear the risk of any fraud.

"If we go soft on them now then they just won't do it, and we are seeing an increase in fraud coming through from international markets."

Although unable to confirm a date, Taylor said: "It's a matter of sooner than later that you'll see smart cards issued in the New Zealand market."

John Albertson, chief executive of the New Zealand Retailers Association, said retailers who owned, rather than rented, terminals may be reluctant to invest before January 1.

"Obviously if someone owns their own terminal they want to maximise the use of it," Albertson said.

He added that the timing of the change-over is not ideal for retailers.

"We've never been very comfortable with a January change-over date because the two months leading up to it are the busiest months in retail," he said.

"But the big thing is we've got to keep the pressure on to make sure we get as many changed as possible."