The first chip-card purchase in the Baltic states was made by Visa International's President for Central and Eastern Europe, Middle East and Africa Anne Cobb on Sept. 27 in Riga. Visa was the first of the two international card organizations to certify Hansabanka's ability to service chip cards. Certification from Europay, the other organization servicing Eurocard/ Mastercard and Maestro brands, is under way.
The next steps are to service the chip cards in the bank's branches, issue them locally and make them being acceptable in ATMs, Ugis Zemturis, vice-president of Hansabanka, told journalists. Hansabanka plans to complete this process in the next two years.
"Chip cards have a lot of advantages but basically they're smarter, safer and faster," Cobb said. "(This technology) is almost as important as the introduction of our fist Visa card 30 years ago, as we are talking about replacing 1 billion cards all over the world," she stressed.
The main advantage of chip technology is added security. With the new technology, the possibility to copy cards, will be considerably reduced. In European Union countries, payment-card-related fraud increased by 50 percent in 2000, causing a loss of 600 million euros ($545.45 million), the European Commission announced in February.
Although this fraud accounts for only 0.07 percent of the total turnover of European banks, it increases residents' mistrust to card-related transactions and hinders the development of e-commerce, the European Commission said.
At Visa fraud made up 0.08 percent of the turnover, Cobb said. Erdovan Ates, manager for corporate security projects at Europay, said he wasn't allowed to disclose his company's losses due to fraud. He stressed that with bank technologies migrating to chips, "fraud will be minimized but it will never disappear."
"The e-commerce revolution has been slowed by a lack of secure payments. E-commerce represents an insignificant part of global credit card transactions but the majority of credit card fraud," Harolds Celms, chairman of Netcard, the Latvian company dealing with one of the first chip-card projects in the Baltics, said at the Baltic Sea Region e-Business Forum in Riga on Sept. 28.
Commissioned by the Riga City Council, Netcard implemented the entry card system in Riga's Old Town starting January, 2001. "This is the first project comprising payment and control systems," Aris Meilands, Netcard's director, told The Baltic Times. Netcard services more than 6,000 entry cards.
Lattelekom, the Latvian fixed-line telecommunications monopoly, was the first in Latvia to use the chip technology in its cards. Transfer from magnetic strips to chips was started in 1997 mainly due to safety reasons, said company spokesman Raimonds Cakste. Currently, there are no plans to give the calling cards additional functions, but some of Lattelekom's phone booths already accept credit cards.
It's also possible to store more information on chip cards.
However, Hansabanka's management was not able to say which features of smart cards would be offered to customers, as technology advances very rapidly. One card can serve as a bank card and electronic wallet, which is used for small purchases by spending an amount previously transferred to the card. The same card can serve as a club card and health insurance policy.
For now, the cards issued in Latvia will have both the magnetic strip and chips as it will take several years to adjust the infrastructure all over the world.
By Jan. 1, 2002, all point-of-sale terminals in stores and elsewhere servicing Visa cards must have a chip reader and by 2008 all cards must be chip cards.
In 1996 more than 900 million chip cards were in circulation all over the world. By 2000 the number increased to 3 billion cards. According to estimates by the international auditing company Deloitte and Touche, by the year 2003 more than 6.3 billion chip cards will be in use.
The first chip cards were created in France in the 1970s but did not win immediate recognition. However, by the late 80s the entire French banking system decided to migrate to chip technology, Cobb said.
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