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The failure of some more advanced economies to upgrade to the latest eletronic payment card technologies is causing Nigerian card holders to be vulnerable to hackers when they travel abroad, BusinessDay has gathered.
Facts have emerged that hackers in some countries abroad are duplicating Automated Teller Machine (ATM) cards belonging to Nigerian bank customers who travel to those countries and conduct payment transactions on their cards.
The hackers clone the Nigerian cards and use them to purchase items worth millions of dollars from shopping malls in the US.
“Nigerians are at risk of online fraud when using cards in many nations abroad because in many of these countries, their cards and payment terminals are yet to comply with EMV standards, said Musa Jimoh Itopa, deputy director, Payment Systems Department, at the Central Bank of Nigeria (CBN). .
“They still use magnetic stripe, a technology standard in use for over 40 years”.
Asked how the Nigerian ATM cards are being duplicated and used in the US, Jimoh said, “In Nigeria, we use chip and PIN, but the U.S still uses magnetic stripe. Fraudsters steal data on a customer’s ATM card, duplicate it and go to shopping malls and begin to purchase items.
“When they are using the PoS in US shopping malls, all they do is to swipe the card and then payment is made. They don’t need to put any PIN. Through these, items are bought using Nigerian ATM cards”, he said at a training session organised by the Electronic Payments Providers Association of Nigeria (E-PPAN) in Lagos at the weekend.
The spate of hacks on Nigeria payment cards had compelled senior officials of the CBN to meet with a team of Economic and Financial Crimes Commission (EFCC) operatives, led by the director of operations in Abuja, some months ago.
Informed sources said the banks were seeking the assistance of the anti-graft agency to arrest some of the fraudsters using duplicated Nigerian ATM cards in the US.
According to technology experts, fraudsters can pull card numbers and expiration dates from magnetic stripe cards to clone payment cards.
Statistics show that there are about 25 million cards issued by 23 Nigerian banks, with all of them being chip and PIN enabled, in line with EMV specifications.
EMV is a global standard for the inter-operation of Integrated Circuit (IC) cards (‘chip cards’) and IC card capable Point of Sale (PoS) terminals and Automated Teller Machines (ATMs), for authenticating card transactions.
Nigerian banks are significantly ahead of many of their counterparts abroad, in terms of payment card security.
This is because Nigeria as a virgin starter in payment technologies is beginning from the latest systems, while more developed economies started much earlier with legacy systems and have had to upgrade along the way.
Countries around the world, such as the United States (US); parts of Europe, Latin America and Asia Pacific, have not fully embraced the Chip and PIN technology based on the EMV (EuroPay, MasterCard and Visa) technical standards.
According to Worldwide EMV Deployment reports by American Express, JCB, MasterCard and Visa, the Asia/Pacific region has 26.7 percent EMV card adoption rate. Canada, Latin America, and the Carribbean have 49.2 percent EMV card adoption rate. Europe Zone 2 has a 15.5 percent EMV card adoption rate. The report adds that there is no data on the U.S, the world’s single largest user of payment cards.
Victor Alaofin, managing director/chief executive officer, Ryte Internet Technology Limited, confirming that there is a lot of cyber securityrisk associated with using payment cards in the U.S, says “The migration cost for them is too high, in a country with about 30 million terminals. It was easy for Europe to migrate because they developed the technology. Chip & PIN came from France”, said Alaofin in an interview with BusnessDay.
The U.S has begun the process, through the ‘Payment Networks’ Liability Shift’, to migrate all payments cards to EMV. “Annual costs of card fraud in the U.S. alone are estimated at $8.6 billion per year.
“Experts believe that figure will rise to $10 billion or higher by 2015, especially if the U.S. does not make significant progress with chip card adoption”, said Jeff Carelli, vice president of Credit &Fraud Solutions.
The reluctance to adopt EMV in the U.S. until 2011 has been mostly due to cost. Replacing cards is pegged at nearly $3 billion, and replacing payment terminals will cost merchants more than $2.5 billion collectively. Also, issuers and merchants have not seen a justification for this cost because fraud losses, while increasing, are still a very small percentage of overall revenue.
In 2009, the CBN mandated all deposit money banks in Nigeria to replace their customers’ Automated Teller Machine (ATM) cards from an archaic and easily hacked technology to one that was more secure – Chip & PIN technology. This move helped lower incidences of payment card fraud by more than 90 percent by 2010, according to the apex bank.
Facts have emerged that hackers in some countries abroad are duplicating Automated Teller Machine (ATM) cards belonging to Nigerian bank customers who travel to those countries and conduct payment transactions on their cards.
The hackers clone the Nigerian cards and use them to purchase items worth millions of dollars from shopping malls in the US.
“Nigerians are at risk of online fraud when using cards in many nations abroad because in many of these countries, their cards and payment terminals are yet to comply with EMV standards, said Musa Jimoh Itopa, deputy director, Payment Systems Department, at the Central Bank of Nigeria (CBN). .
“They still use magnetic stripe, a technology standard in use for over 40 years”.
Asked how the Nigerian ATM cards are being duplicated and used in the US, Jimoh said, “In Nigeria, we use chip and PIN, but the U.S still uses magnetic stripe. Fraudsters steal data on a customer’s ATM card, duplicate it and go to shopping malls and begin to purchase items.
“When they are using the PoS in US shopping malls, all they do is to swipe the card and then payment is made. They don’t need to put any PIN. Through these, items are bought using Nigerian ATM cards”, he said at a training session organised by the Electronic Payments Providers Association of Nigeria (E-PPAN) in Lagos at the weekend.
The spate of hacks on Nigeria payment cards had compelled senior officials of the CBN to meet with a team of Economic and Financial Crimes Commission (EFCC) operatives, led by the director of operations in Abuja, some months ago.
Informed sources said the banks were seeking the assistance of the anti-graft agency to arrest some of the fraudsters using duplicated Nigerian ATM cards in the US.
According to technology experts, fraudsters can pull card numbers and expiration dates from magnetic stripe cards to clone payment cards.
Statistics show that there are about 25 million cards issued by 23 Nigerian banks, with all of them being chip and PIN enabled, in line with EMV specifications.
EMV is a global standard for the inter-operation of Integrated Circuit (IC) cards (‘chip cards’) and IC card capable Point of Sale (PoS) terminals and Automated Teller Machines (ATMs), for authenticating card transactions.
Nigerian banks are significantly ahead of many of their counterparts abroad, in terms of payment card security.
This is because Nigeria as a virgin starter in payment technologies is beginning from the latest systems, while more developed economies started much earlier with legacy systems and have had to upgrade along the way.
Countries around the world, such as the United States (US); parts of Europe, Latin America and Asia Pacific, have not fully embraced the Chip and PIN technology based on the EMV (EuroPay, MasterCard and Visa) technical standards.
According to Worldwide EMV Deployment reports by American Express, JCB, MasterCard and Visa, the Asia/Pacific region has 26.7 percent EMV card adoption rate. Canada, Latin America, and the Carribbean have 49.2 percent EMV card adoption rate. Europe Zone 2 has a 15.5 percent EMV card adoption rate. The report adds that there is no data on the U.S, the world’s single largest user of payment cards.
Victor Alaofin, managing director/chief executive officer, Ryte Internet Technology Limited, confirming that there is a lot of cyber securityrisk associated with using payment cards in the U.S, says “The migration cost for them is too high, in a country with about 30 million terminals. It was easy for Europe to migrate because they developed the technology. Chip & PIN came from France”, said Alaofin in an interview with BusnessDay.
The U.S has begun the process, through the ‘Payment Networks’ Liability Shift’, to migrate all payments cards to EMV. “Annual costs of card fraud in the U.S. alone are estimated at $8.6 billion per year.
“Experts believe that figure will rise to $10 billion or higher by 2015, especially if the U.S. does not make significant progress with chip card adoption”, said Jeff Carelli, vice president of Credit &Fraud Solutions.
The reluctance to adopt EMV in the U.S. until 2011 has been mostly due to cost. Replacing cards is pegged at nearly $3 billion, and replacing payment terminals will cost merchants more than $2.5 billion collectively. Also, issuers and merchants have not seen a justification for this cost because fraud losses, while increasing, are still a very small percentage of overall revenue.
In 2009, the CBN mandated all deposit money banks in Nigeria to replace their customers’ Automated Teller Machine (ATM) cards from an archaic and easily hacked technology to one that was more secure – Chip & PIN technology. This move helped lower incidences of payment card fraud by more than 90 percent by 2010, according to the apex bank.
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