The Republic of Kenya is among the latest countries to make the move to EMV-chip cards, as its local banks and processors mount an ambitious campaign to transition the smart-card standard by early next year in a move to combat fast-rising fraud.
Led by the Kenya Bankers Association, the umbrella organization for the country's banks, and backed by Kenya's Central Bank, the nation is said to be well on its way to full EMV-compliance for debit and credit cards by March 2014, a timeframe set by the KBA. The country recently passed its Sept. 30 goal for EMV compliance on all ATMs. Point of sale machines are required to accept EMV by December 2013. EMV cards improve security over magnetic-stripe cards by storing sensitive account information in a secure chip.
"The mandate [means] the players are really ready to prioritize these projects," says James Wainaina, vice president and area business head for East Africa for MasterCard. More than half a dozen of the nation's 44 MasterCard banks are already issuing chip cards, many of them contactless, he adds. In July, Equity Bank began to roll out 5 million EMV prepaid and debit MasterCards in Kenya, Uganda, Tanzania, Rwanda and South Sudan.
The Kenyan EMV transition's supporters include MasterCard, Visa, KBA, De La Rue, TSYS and Paynet Group (East Africa's largest card processor).
Card usage and transaction values have been growing quickly in the East African nation in recent years. According to the Central Bank of Kenya, there were more than 10.7 million ATM, credit and debit cards in circulation by the end of 2012, representing a 6 percent increase over the previous year. The value of card transactions has risen more than 74 percent to 1 trillion Kenyan shillings in 2012 alone, says Wainaina.
Data from the Central Bank of Kenya shows that the number of card transactions in the country grew tenfold in the past seven years, says Habil Olaka, CEO for the KBA.
And with the increased card use and transaction amounts, Kenya has seen a sharp rise in fraud, especially as neighboring regions move to EMV-chip cards, driving fraudsters to regions where EMV is not yet widespread. According to statistics from the Banking Fraud Investigations Department (BFID), financial institutions lost an estimated 1.49 billion Kenyan shillings to fraud between April 2012 and April 2013.
While the losses were not all attributed to card fraud, the increase in card usage has necessitated tougher measures, according to Bernard Matthewman, CEO for the 10-year-old Paynet Group.
"The criminal gangs tend to migrate toward the low-hanging fruit," Matthewman says, adding that Nigeria, South Africa and much of the Middle East has already moved to EMV.
Olaka agrees: "We have seen impressive economic growth and rising levels of disposable incomes, causing our market to be an attractive site for perpetrators of financial crimes. As the country embraces the card technology, the banking sector also needs to engage consumers and improve its system so as to deal with card related insecurity."
EMV is not completely new to the scenic African nation. Acquirers in Kenya have been working to upgrade systems to EMV since 2009, to meet the needs of tourists from countries that have already switched to EMV issuance, Matthewman says.
"We have half the solution in place but [until recently] we were not issuing EMV cards domestically," he says. Nairobi-based Paynet Group processes transactions for more than 30 of Kenya's banks.
Olaka notes that many banks are already EMV compliant. "By meeting the EMV global standards for credit and debit card payments, we will be able to materially deal with the ATM fraud issue as an industry," Olaka says in an emailed statement.