VietNamNet Bridge – Ignoring the advice by international card organizations about the low security of magnetic cards, most Vietnamese banks still have not shifted to use chip cards with the higher security.

Banks don’t want to spend money on chip cards

A report by the State Bank of Vietnam showed that by the end of the second quarter of 2013, domestic banks had issued 54.89 million domestic payment cards and 5.26 million international cards.

International card organizations have adviced banks to use EMV-standard chip cards instead of magnetic cards in order to ensure the safety and minimize risks. However, the anticipated required high investment costs have made domestic banks shrink back.

Nguyen Hai Ha, CEO of MK Smart, said the investment rate on the EMV system is high, which is a big challenge for small banks, whose numbers of issued cards remain modest.

According to Nguyen Huu Phuc, Director of Sacombank’s Card Center, it is not really urgent to replace domestic magnetic cards with chip cards.

Domestic cards can be used for the transactions at POS, ATM and via Internet. Evildoers will not be able to make transactions if they don’t know PIN codes.

Meanwhile, it is more costly to use chip cards instead of magnetic cards. Banks would have to spend no less than $50 million to replace the 50 million magnetic cards with chip cards. The sum of money does not include the other expenses, such as the ones on card delivery and card activation.

Also according to Phuc, domestic cards in Vietnam have been used mainly for withdrawing cash from ATM, while only 0.3 percent has been used in payment.

All the above said factors make banks hesitant to use chip cards, especially in the current context of big difficulties.

Meanwhile, it’s necessary to replace international magnetic cards with chip cards urgently. International cards are accepted all around the globe, while criminals can easily steal information about cardholders to make transactions.

Nguyen Binh Phuong, Deputy General Director of Nam A Bank, affirmed that using EMV standard chip cards is an urgent measure to heighten the security in the transactions with cards, and that the more banks hesitate, the higher risks their clients would face.

Will outsourcing help banks save costs?

According to Phuc from Sacombank, there are two choices for banks to issue chip cards. They can either produce cards themselves or outsource to others. Big banks would prefer making cards themselves, while smaller banks would prefer the outsourcing which allows them to save costs and time.

With the small scale of the Vietnamese banks, outsourcing would be the better choice for the majority of them.

With the outsourcing, banks don’t have to spend money on technologies, equipment and labor force; while the required initial investment rate is small. If so, banks can gather their strength on marketing campaigns to attract more card users and focus on the risk management.

Meanwhile, Ha believes that the State Bank of Vietnam should come forward and build up the standards for chip cards applied specifically for domestic ATM cards, because domestic cards don’t necessarily use EMV standards. This would allow cutting down the expenses, while card holders still can have chip cards with high security level.

Thanh Mai