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Maestro Europe Only Anti Fraud Measure by 23 Banks in Belgium Bart Guns Global Head of Payments KBC Group

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Maestro Europe Only Anti Fraud Measure by 23 Banks in Belgium Bart Guns Global Head of Payments KBC Group Maestro Europe only anti fraud measure by 23 banks in Belgium Bart Guns Global Head of Payments KBC Group COGEPS | 2-3 April 2012 Titel hoofdstuk Agenda 1.Problem 2.Anti skimming not feasible nor opportune 3.European statements 4.Chip only pragmatic issues 5.Europe only approach 6.Impact & Follow-up COGEPS | 2-3 April 2012 2 Fraud problem for debit cards abroad • Domestic debit card scheme BC/MC = zero counterfeit fraud thanks to chip & PIN • Skimming incidents on ATM’s in Belgium > Maestro fraud outside of Europe and primarily in USA • Fraudulent transactions = Magnetic stripe + PIN/signature > no liability shift allowed for USA • PSD: counterfeit fraud = Issuer’s responsibility > reimburse cardholder COGEPS | 2-3 April 2012 3 Anti-skimming not feasible nor opportune • Cost is high per ATM / Terminal and reinvestment every 3 to 5 years as solutions are being overruled • Only waterproof if majority of ATM are equipped • Time to market • Skimming migration to unattended POS (petrol stations, parkings…) and lack of anti-skimming solutions on the market >> Which optimal card approach? COGEPS | 2-3 April 2012 4 European statements (I) ECB 7th SEPA Progress Report: Cards highlights (10.2010) •From 2012 new SEPA cards by default “chip-only”, no mag-stripe payment data •Mag-stripe on request for non SEPA, not EMV regions or bank legacy functions •Liability shift should apply as incentive for EMV migration EPC EMV Fraud prevention Resolutions (2011) # 1 (Issuing) : •Restrict the use of magnetic stripe fall back to exceptional cases •Schemes to ensure through cross-regional liability shifts •Card Schemes to grant issuers option to adopt a chip only and refuse mag- stripe trx COGEPS | 2-3 April 2012 5 European statements (II) ECB at COGEPS (10.2011): Way forward (II) “Card issuers are still called on to issue chip-only cards, but as long as cards are not chip-only, they should: •not allow a fallback to magstripe within SEPA •block (by default) magstripe transactions outside SEPA* •communicate clearly on where/when/how the card can be used -------------------- * Chip-transactions outside SEPA should be possible” SEPA Council Statement of 6 February 2012 meeting …. “The SEPA Council understands that, as long as global migration to EMV-chip technology remains incomplete, card issuers may issue cards with magnetic stripe. It urges, however, card issuers and card schemes, in co-operation with payment service providers and merchants, to develop solutions to minimise the fraud related to the use of magnetic stripe as well as adequate communication strategies.” COGEPS | 2-3 April 2012 6 Chip-only approach: pragmatic issues • Requires issuance of new debit cards without or with reduced magnetic stripe > huge costs • If cardholder travels outside of EU then he has to request a second card with magnetic stripe: •Costs; • Cumbersome and not consumer friendly • Delay for delivery… • Begin 2011 some ATM/POS terminals within EU were are not yet migrated to chip-EMV > transaction in EU not always possible for cardholder • Cardholder does not know which ATM/POS terminals are not yet migrated to chip-EMV > confrontation with unexpected refusal of transaction > bad customer experience > complaints… COGEPS | 2-3 April 2012 7 Europe only approach in Belgium • Maestro function for POS/ATM per default only available in Europe region (EMV + magstripe transactions) • Cardholder can request to unblock (temporarily) for use outside of Europe region • 23 banks decided to participate with individual arrangements • As from 17 January 2011 • Compliant with Maestro Global Rules of MasterCard • Communication: • Clear communication by participating banks to cardholders compliant with PSD (2 months before introduction) • Common press release to public • No deterrence of fraud if blocking does not apply for a critical mass of cards Note 1: Maestro is the debit scheme installed on Belgian debit cards, and developed by Mastercard, which is mainly used for transactions other than domestic Note 2: no blocking for internet transactions thanks to 3D-Secure position COGEPS | 2-3 April 2012 8 Europe region defined by Mastercard: 56 countries COGEPS | 2-3 April 2012 9 Europe only approach in Belgium: Impact and follow-up 2008 2009 2010 2011 skimming cases 244 442 1.720 75 Fraud amount ? +200% +300% -94% • Drastic reduction of fraud > Remaining fraud due to: • non participating banks • period 1-16 January 2011 • non-chip/EMV terminals in Europe region (liability shift > charge back) • On average +/- 40.000 cards unblocked (temporarily) by cardholders • Concept copied by other banks abroad • No opposition by BE national competition authority > recognised that joint action was indispensable to result in deterrence of faudulent activity COGEPS | 2-3 April 2012 10.
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