Smart Cards Appear Set to Take off in Chile to Prevent Banking Fraud

Smart cards have emerged as the Chilean banking sector's latest tool to combat fraud. Similar in size to a credit card, a smart card contains an embedded memory chip that holds information about the user. It is much harder to steal information from these cards than from magnetic-strip cards. The country's banks are expected to spend some US$30m on chip-based payment cards by 2010 in an effort to deflect fraud of magnetic-strip cards.

The roll-out of new systems, however, will require an overhaul of current infrastructure--such as the reconfiguration of existing automatic teller machines (ATMs) that only accept magnetic-strip cards. The new smart-card system is being developed and implemented by Etisa, a company founded in 2000 by several of the largest banks in the country--including Banco de Chile, Banco de Credito e Inversiones, Scotiabank Sudamericano, Banco Santander-Chile--and the main telecoms firm, Telefonica CTC Chile. Etisa expects that smart cards will have almost completely replaced magnetic-strip cards in Chile by 2007.

Chileans presently use some 6m magnetic-strip cards to access banking services (not including credit cards). Transbank, a firm that processes credit-card transactions in Chile, has been upgrading its platform for chip payments--some 5,000 of Transbank's 35,000 sales points are now chip-compliant. In an extra boost to the smart-card movement, Chile's public transport system expects to implement smart-card technology by August 2006.