The cost to produce a chip card was about eight to 10 times higher than that of making a card. Thus, with the number of existing customers using the magnetic cards of over 8 million, the conversion would cost a lot, said Pham Dang Khoa, the deputy director of Card Centre, Retail Banking Division of Vietnam Joint Stock Commercial Bank for Industry and Trade (Vietinbank). Khoa affirmed that, despite having to pay a hefty fee for card conversion, due to the outstanding advantages of chip cards compared to magnetic cards, VietinBank was ready to assist customers in converting.
According to Khoa, the biggest advantage of the chip card was the encrypted information contained in the chip, and only the card-issuing bank could read the data in the card. Furthermore, the chip card was difficult to counterfeit. Therefore, the change from a magnetic card to a chip card would prevent criminals from stealing card data to make fake cards to withdraw money.
So far, there had been no response recorded on the security of the chip card, which showed it’s safety, Khoa said.
Thus, the biggest problem for banks when converting magnetic cards to chip cards was the cost. There was not only the cost of card embryos but also the costs for devices that accepted cards, such as ATMs, pos machines.
In fact, if customers had to pay the fee, the conversion rate would be meager. Customers who had low habit and demand for using cash-free consumption would find it challenging to switch to using chip cards to pay fees.
At a recent conference discussing the conversion of magnetic cards to chip cards, Nguyen Tu Anh, Chair of the Board of directors of the National Payment Corporation of Vietnam (Napas), said that Napas had supported 80 percent of converting fees of domestic chip cards for banks to reduce costs for banks.
Dao Minh Tuan, deputy general director of Joint Stock Commercial Bank for Foreign Trade of Vietnam (Vietcombank), said that in May 2019, Vietcombank officially launched domestic chip cards. The goal set in 2019 was to convert 30 percent of the number of internal chip cards, 30 percent of ATMs, and 50 percent of units accepting POS cards.
Vietcombank currently had about 14 million domestic debit cards circulating in the market so that the conversion costs would be enormous. However, in the first phase of the conversion, the bank would support the fee for the customers. For long-term goals, Vietcombank pledged to comply with the State Bank of Vietnam (SBV)’s regulations on completing 100 percent conversion of Vietcombank’s domestic cards to chip cards by December 31, 2021.
Also with concerning the costs incurred, Pham Duy Hieu, Chief Executive Officer (CEO) of An Binh Commercial Joint Stock Bank (ABBank), said that the investment in a new and modern payment system required the bank to spend a lot of money on infrastructure. However, with the general trend of the global digital economy as well as the direction of SBV, ABBank set a goal until mid-2020 of converting 100 percent magnetic card to chip card.
Similarly, Nguyen Hung, general director of Tien Phong Commercial Joint Stock Bank (TPBank), supposed that the billet cost of chip cards alone was seven to eight times higher than the price of embryos of magnetic cards. That was not including other expenses. The bank had considered several free programmes for old customers in the first phase of conversion. In the next stage, depending on the policies of SBV as well as the goals of the bank, TPBank would create the best conditions for their customers.
Chu Hong Ngoc, the Head of Operations Division of Vietnam Prosperity Joint-Stock Commercial Bank (VPBank), also shared, VPBank had determined to free conversion from magnetic card to chip card for customers. VPBank currently had about 1.5 million domestic units in circulation and more than 500 POS machines, but the bank would pay the full conversion cost, Ngoc said.
According to Napas representative, Napas had then completed the set of chip card standards with domestic payment cards and implemented pilot cooperation with seven commercial banks, including Vietcombank, VietinBank, Sai Gon Thuong Tin Commercial Joint Stock Bank (Sacombank), ABBank, TPBank, Joint Stock Commercial Bank for Investment and Development of Vietnam (BIDV) and Vietnam Bank for Agriculture and Rural Development (Agribank). However, these seven banks accounted for 70 percent of the total number of domestic payment cards.
In turn, the conversion from a magnetic card to a chip card was being conducted by banks, and the goal of 100 percent conversion by the end of 2021 was entirely feasible.
