According to Clause 4, Article 27b in the Draft amending Circular 19/2016/TT-NHNN on banking cards operation: "From March 31st, 2021, card issuers shall issue new domestic cards as chip cards (not issue new domestic cards as magnetic cards)".
Besides, Clause 2, Article 27a was amended: "As of December 31st, 2021, 100% of ATMs and card acceptance devices at the points of sale operating in Vietnam of card payment organizations comply with the Basic Standards for domestic chip cards".
The State Bank of Vietnam (SBV) explained that the deadline for requiring 100% of standard-chip cards was extended one more year (instead of December 31st, 2020 as currently regulated in Circular 19/2016/TT-NHNN) to suit the actual implementation progress of converting card acceptance devices.
However, the Circular Draft supplemented a compulsory deadline for banks to issue new domestic chip cards so that banks can actively implement the issuing process, allocate human resources and funding to support customers to switch from magnetic cards to chip cards.
A chip card has a small chip on the front of the card following international card organizations' standards. It creates a unique and never-repeated transaction code, helping to reduce the risk of fraud or tampering. Therefore, the conversion from magnetic cards to chip cards contributes to improving the safety, security, and speed of the transaction.
According to statistics of commercial banks, more than 20 banks had actively converted magnetic cards to chip cards by the end of September 2020. For example, The Vietnam Bank for Agriculture and Rural Development (Agribank)had converted 13 million magnetic cards to chip cards. More than 3,000 ATM/CDM machines, 24,000 POS machines had updated the feature of accepting domestic chip cards to support customers' transactions.
Other banks are also stepping up this transformation. According to Mr. Tu Tien Phat - General Director of Asia Commercial Joint Stock Bank (ACB), the bank has recently spent about VND 400 - 500 billion on technology every year. Up to now, 100% of ACB's ATMs have accepted chip cards. Sai Gon - Hanoi Commercial Joint Stock Bank (SHB) also announced it has stopped issuing new magnetic cards for domestic debit cards and replaced them with chip cards since November 9th, 2020. At the same time, the bank has converted active domestic debit cards to chip cards without charge upon customers' requests.
With the rapid development of technology, the cost of issuing chip cards is now much lower than before. Although contactless payment technology such as QR codes, e-wallets, and apps on mobile devices is developing, bank cards are forecasted to grow due to their versatility in non-cash payments.
Recently, contactless chip card technology has been applied to bring customers more benefits, including processing speed, convenience in transactions, and information security. Contactless chip cards have still been used to draw cash, pay via POS machines at supermarkets, convenience stores, restaurants, and coffee shops. Therefore, investment in physical card technology still creates a competitive advantage for commercial banks besides other forms of mobile payments.
However, according to banks, the biggest difficulty is that many customers have not actively registered to convert their current cards despite many announcements from banks. As of the end of the third quarter of 2020, there were 19,500 ATMs, 280,400 POS machines, and more than 93.78 million domestic cards in operation, which are mainly ATM cards. The number of converted chip cards still accounted for a small proportion. Commercial banks should have more promotion policies to encourage users to convert their magnetic cards to chip cards.
Compiled by VietnamCredit