Hotels no to Visa on concerned over cloned cards
Business Times (Malaysia); Jan 15, 2001
BY VASANTHA GANESAN; ZETY FADZILAH BAHARUDDIN
FOR the past month or so, notices had been put up at the reception
desks of several leading hotels in Kuala Lumpur to tell clients that
Visa cards are not welcomed.
Their action was apparently based on concern over the growing
currency of cloned credit cards, which are put into circulation through
the use of sophisticated machines to capture data contained in the
magnetic strip on the back of the genuine cards.
And Visa is not the only victim. All cards with magnetic strips can be
and have been cloned, including the automatic teller machine cards
issued by the banks.
The industry had noted a worrying trend of the problem in the last
two years, but for Visa International it has come to a head given the
public relations fallout from the latest development.
And the hotels' decision does not mean that Visa cards are facing an
inordinately bigger cloning problem than others.
Apparently, the Visa has been declined chiefly because Visa
International imposes punitive fines of up to US$25,000 (US$1 =
RM3.80) on acquiring banks which face repeat instances of cloning
and fraud.
Acquiring banks sign up merchants to acquire the debts that are
chalked up by cardholders when they use their cards, and then
forward payments to the card issuer.
Because of the shift fine, acquiring banks have strongly advised the
merchants not to accept payments charged to Visa cards.
Business Times found that at least four major hotels in Kuala Lumpur
have declined Visa cards since last November. Due to the negative
publicity generated, Visa International has decided to do away with
the fine, which will be effected as early as this week, an industry
source said.
Other cards which have also fallen victim to the crime have not been
"blacklisted" by acquiring banks because the issuers impose less
stringent forms of penalty.
They issue warnings or impose fines on an incremental and
graduated basis. In the case of Visa International, a warning is issued
and then followed by a fine of US$25,000 should there be a
subsequent case of fraud within 180 days.
Visa International's stand is that if the penalty is not heavy enough,
the matter would not be taken seriously.
It is understood that the removal of the fine comes in the wake of a
compromise between Visa International and the acquiring banks to
work together on resolving the cloning problem.
Accordingly, industry sources said Visa International is also working
on introducing the Magneprint technology to make the data strip
more secure.
Card fraud can occur in several ways, chiefly through dishonesty
(false report that a card is stolen or lost); counterfeiting; and
unauthorised mail and telephone orders.
One popular method of counterfeiting card-skimming where data on
the magnetic strip can be copied by a device as small as a cigarette
case or cardholder. All that is required is a quick swipe through the
device, usually when a cardholder hands over his card for payment.
Industry wise, 85 per cent of problems faced by card issuers in the
Asia Pacific region pertain to some form of fraud. From this, 65 per
cent involves skimming. In Malaysia, more than half of the skimming
problem impacts the banks.
Among the markets that experience a high incidence of fraud in terms
of numbers are Japan, Australia and Hong Kong. As for value,
Malaysia and Taiwan are particularly problematic.
Fifty per cent of the cloned cards in Malaysia are used abroad as it is
believed that syndicates use the country as its base, whereas in
Taiwan, fraudulent transactions are mostly within its borders.
According to Visa International statistics, fraud as a percentage of its
total global card volume is 0.06 per cent.
Its Magneprint technology, expected to be introduced this year, has
better safety features, and no two cards will be the same. Banks
using MagnePrint can store the "fingerprint" of each card in the
computer to allow an immediate check should a card is suspected to
have been cloned.
Between the time it removes the hefty fine and introduces the anti-
skimming technology, Visa International plans to initiate various
measures to promote better business practices by banks and
merchants to counter the threat of fraud.
For that, Visa International country manager for Brunei, Guam,
Malaysia and Singapore, Ms June Seah, said her company has
worked out several strategies.
As a first step, discussions have been initiated with the card industry,
all payment brands, banks, government agencies and trade
associations to draw up education and awareness programmes to
promote the safe and convenient use of all payment cards.
Concurrently, ever more sophisticated fraud-prevention technology
and tools, including a neural network, will be brought into play. Fraud
trends will be identified and banks helped to monitor, control and
reduce their incidence.
Seah said about RM1 million has been allocated to launch the
campaign in Malaysia that will include educating the consumers to be
more responsible.
A similar programme is planned for Taiwan.
Copyright © Asia Intelligence Wire
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