Philippines – BSP sets June 2018 deadline for banks’ shift to EMV technology

By | June 15, 2017

BANKS have roughly a year left to complete the shift to chip-based cards, as the Bangko Sentral ng Pilipinas (BSP) tightened rules to prod financial firms to adopt the more secure platform for its clients.

In a statement, the BSP gave Philippine banks a June 30, 2018 deadline to fully adopt the Europay Mastercard Visa (EMV) technology, which makes use of microchip-based rather than magnetic strip cards for its depositors and credit card holders.

In 2014, the central bank announced that it will impose the EMV standards among local card-issuing firms, with the original deadline set on Jan. 1, 2017.

The EMV card system is currently the international standard as it is deemed more secure compared to the magnetic strip cards which are prone to skimming — usually done by illegally tapping into automated teller machine (ATM) terminals to steal client data.

“Full compliance constitutes completion of all EMV-related activities from upgrading/enhancement of back-end processes and systems, ATM and POS (point-of-sale) terminals to the replacement of magstripe credit and debit/prepaid cards, including distribution of EMV-compliant cards,” read BSP Memorandum M-2017-019 issued on June 9.

There are around 76 million debit and prepaid cards in the country, alongside 8.5 million credit cards, according to the central bank. Local banks also operate 19,084 ATMs nationwide.

The regulator also told lenders to take extra steps to invite cardholders to turn in their old cards and have these upgraded to the EMV standard.

“BSFIs (BSP-supervised financial institutions) are further expected to develop strategies to entice or force clients to replace their old cards with EMV cards,” the central bank said, such as the deactivation of existing cards by a certain date, dangling rewards or freebies, and intensified advertising.

Ahead of the new deadline, the BSP required banks to put up reserves for potential card fraud in its balance sheets to make sure that it will bear the burden of possible theft cases for non-EMV cards still in use.

The fraud loss provision will be a mandatory buffer that banks have to set aside, similar to loan loss reserves for soured debts. The provision should be in place and reported quarterly starting Sept. 30.

Earlier this year, the BSP rolled out the liability shift framework, which requires banks to shoulder skimming cases if the victim has not been issued the microchip-based card.

Non-compliance with the tighter EMV guidelines would make a “serious offense” that would warrant penalties from the regulator, the BSP warned.