The adoption of EMV cards in Africa

With the global adoption rate of EMV-enabled cards gaining traction, South Africa is slowly starting to move in the same direction as the rest of the world. And with MasterCard removing its support of non-EMV bank cards in the nation, the banks are now being pushed to produce EMV-enabled cards for all their customers.

Fraud levels at an all time low

According to MasterCard’s Group Head for Processing Product Management, Johan Gerber, fraud levels on MasterCard issued cards are at an all-time low. During his visit to Johannesburg, Gerber did not reveal the exact figures and statistics but explained that the data consists of the company’s gross dollar volume (GDV) and the basis points data. He stated that, in terms of the levels of fraud using MasterCard issued cards, they have seen a steady decline over the second quarter. In comparison the rest of the world, South Africa is running well below the average for fraud related concerns.

One of the key reasons for this low level of card fraud is the widespread adoption of EMV technology in both cards and terminals. EMV – which stands for EuroPay, MasterCard, and Visa, who first implemented the technology into credit cards – has helped to tackle card fraud better in South Africa than in any other nation across the globe.

Banking industry disagrees with MasterCard’s data

However, card fraud statistics in the overall banking industry paint a very different picture. While MasterCard claims historic lows in fraud, the South African Banking Risk Information Centre (SABRIC) has expressed its concern for the true state of card fraud in the country. According to the banking industry figures, card fraud continues with fraudsters making false applications to obtain multiple cards that can be misused and thrown away. Online application channels are often used to make multiple applications using false details, giving the fraudsters multiple cards and PINs.

Another interesting area of fraud increase was for “card not present” transactions, which showed an increase of almost 21 percent on the previous years.

New deal could help South African card issuers

Proxama, a leading provider of mobile wallet solutions and card support platforms in Africa, has recently signed a new deal that could take South African credit card fraud to a real all-time low. The company has announced it has brokered a 5-year deal with the leading financial services providers in South Africa. This will allow them to supply in-house EMV-enabled card issuing, card life management and PIN management for major financial institutions. The company’s representative in the region, Patrick Regester, said, “The customer will benefit from Proxama’s in-depth experience of smart card deployments in South Africa and around the world.”

The shift to EMV-enabled technology was begun in 2014, but adoption was slow for the first year. In 2015, South African Absa Bank, which is a subsidiary of Barclays Africa Group, piloted the new combination of EMV and biometrics in chip card transactions.

The African continent is lagging behind the rest of the world

However, credit card usage in Africa still falls behind other continents, mainly due to the rural nature of most houses on the continent. In places like Kenya, only around 10 percent of all financial transactions are cashless payments. This is higher in other parts of the sub-Saharan regions, at around 20 percent being cashless, but is still very low in comparison to other comparable continents like Asia or South America. For most in Africa, cash is still the king. And this is partly down to the lack of trust in cards due to the high rates of fraud in many African countries.

EMV is slowly being introduced in Africa

But things are changing. Banks and financial institutions are pushing the adoption of EMV technology as the way to get consumers to trust cards. The rise of sophisticated technology to counter potential fraud is helping to increase the adoption of EMV in countries like Kenya, Nigeria, Egypt, and Namibia, whose governments strongly support the investment programs.

EMV adoption is taking off, and the penetration rate is around 77 percent at present and still rising. However, many parts of Africa are still using the magnetic strip to process the payments due to a lack of EMV-enabled terminals. In Kenya, there is a huge push by both MasterCard and Visa to migrate transactions away from magnetic strips to EMV.

As much as the individual companies are building their card payment programs, they cannot move forward until the consolidation of process and technology is complete. And migration to common industry standards, such as XML and SWIFT networks will enable the nations to increase the rate of EMV use across the continent.

More cards are accepted in African countries

The future does look good, though, despite all the barriers they are hitting. Discover Financial Services are making waves in Morocco and South Africa, with the acceptance of their Diners Club International cards in more retail and merchant outlets. And JCB, the Japanese card, now works in every terminal in South Africa, while China’s UnionPay is fully accepted in Tanzania and Nigeria. Another benefit for the card companies increase in adoption is the increase in investment in African countries. External investment opportunities have given rise to an upsurge in consumer spending, according to the McKinsey Global Institute. They are predicting an annual rise in consumer spending to 1.4 trillion dollars by the year 2020.

Mobile wallets could be the future for Africa

And to top it all off, while they continent may be falling behind in the adoption of EMV technology, the overall acceptance of mobile payment platforms outstrips other regions. Due to many standard credit cards and bank accounts not being available to the majority of the African population, the use of mobile wallets has been adopted by many Africans. In Kenya, which has a population of around 43.1 million people, there are almost 32 million subscribed mobile phones. And around 26 million are used for mobile transactions.

While it seems credit cards and EMV cards have failed to fully integrate into the African continent, it would appear that the African people have leapfrogged onto the next level, and taken to mobile wallets and mobile payment transactions more readily.

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