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ETSL hurries up switch to smart cards 2 February, 2004 By RICHARD WOOD Original article can be found
at
The Dominion
Post The mandate was outlined in a bulletin to eftpos terminal vendors. It was described by industry commentators as "aggressive but necessary". ETSL aims to ensure most terminals can accept smart cards conforming to the international EMV standard by the end of 2006 and all by 2008. The cost of upgrading existing retailers' terminals is expected to total up to $200 million. ETSL processes about 85 per cent of all eftpos transactions and is jointly owned by all the major banks except ANZ, which has its own rival network. Between 60,000 and 80,000 eftpos terminals will have to be upgraded or replaced, with the cost expected to fall on both retailers and banks. ETSL says that as from today, merchants can only install non-chip capable machines if they are adding customer lanes to a site or can get an exemption from their bank justified on the grounds of requiring compatibility with existing site equipment. The move away from magnetic stripe technology to smart cards is being driven by credit card companies such as Mastercard and Visa. The credit card companies want to promote the uptake of smart cards because of their inherently superior security and their ability to support sophisticated new functions such as tailored loyalty schemes. New Zealand Retailers Association chief executive John Albertson says retailers face a significant cost, but this is the "harsh reality" of the move to smart cards. It's not yet clear how much of the cost will be borne by retailers and how much by banks and eftpos vendors. This will come down to whether machines are owned or leased, whether they can be upgraded, who has to pay for upgrading or replacing leased machines – as well as depending on what claims were made as to terminals' EMV compatibility at their time of sale. Leases typically run for three years, so many retailers will be part-way through a lease when the mandate takes effect. Mr Albertson says any retailer that bought terminals during the past year would have been expecting them to last longer than 2006. Those with leases will need to check their contracts. Larger retailers are more likely to have purchased their machines outright, though they will suffer a loss in value of that equipment, assuming there is no secondhand market for non-EMV machines. Mr Albertson says he hadn't been informed of the mandate from ETSL and he will be exploring how the impact on retailers can be minimised. ETSL business development manager Darryl Roots says he can't comment on communications to merchants, as these are the responsibility of the banks and terminals vendors. Mr Roots says eftpos terminals fall into three categories. An early group of about 50 must be replaced prior to 2006. The bulk will have to be replaced during 2006, and the remainder by 2008. He says the shift is in the interests of all to combat increasingly sophisticated fraud, but he says the major reason for issuing ETSL's mandate now is that New Zealand is in danger of becoming a "dumping ground" for old terminals from other markets. He says some countries are moving to EMV faster and people have been importing container loads of old terminals into New Zealand. Mr Albertson says he hasn't heard of any container loads of second-hand eftpos machines being imported. Neither has Ian Bailey, the managing director of listed eftpos terminal manufacturer Cadmus. However, Mr Bailey says as a supplier of EMV-compliant eftpos terminals he's happy with the move. He says it is devastating to the second-hand market for eftpos terminals. ANZ's competing network is Eftpos New Zealand. Business development manager John Collins says it has not issued a similar mandate. He says the difference is that Eftpos NZ sells terminals itself, so has greater flexibility to upgrade customers during their term of lease. Mr Collins says Eftpos New Zealand has been providing EMV software upgradable eftpos terminals on its network for some time. He says some contracts will allow this upgrade as part of lease cost. Mr Collins confirms Eftpos New Zealand will follow ETSL's decision, announced last year, in moving eftpos transactions to the Telecom IP network. Original article is copyright 2004, and can be found at The Dominion Post |
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