News

Some Taiwan banks may not meet accelerated ATM card conversion deadline

November 23, 2003

TAIWAN - Some Taiwan banks are complaining about a ruling that speeds up by six months the Ministry of Finance's requirements to replace magnetic stripe ATM cards with integrated circuit (IC) cards.

"We'll do our best to meet the deadline," said a local bank official, who did not wish to be identified beyond the surname Tsai. "But we're also worried that some technologies to enhance the IC cards' capabilities haven't matured yet."

According to a report in the Taipei Times, the finance ministry last month ruled that ATMs would have to be upgraded by June and all magnetic cards would have to be replaced by IC cards by the end of 2004.

(See related stories Taiwan to begin converting ATM cards to chip in September, ATM fraud driving move to chip cards in Taiwan, Taiwan police arrest two suspects in ATM fraud, seeking several more and Taiwan to require digital photos of account holders)

Originally, changing the nation's 60 million cards over to the new system was scheduled to take five years.

Tsai said that it may be difficult to upgrade ATMs in line with the ministry's schedule because of a limited number of engineers qualified to install IC readers on the nation's 17,000 machines.

"We have the readers, but small banks like ours may have to wait in a long line for engineers to install them," Tsai said.

Tsai said that banks are expect the new IC cards to be used for multiple purposes, functioning as smart cards, or "electronic purses," to spur consumption that will offset costs associated with the changeover.

Facilitating a smart-card environment, however, will take time, money, and manpower, Tsai said.

Large banks such as Chang Hwa Bank and the Cathay United Bank believe that IC cards must generate substantial new business to justify their expense.

An executive vice president at Chang Hwa, Hsien Chao-nan, said that it would be a waste of banks' money if the new IC cards are only used to make cash withdrawals. IC cards cost NT$35 ($1.03 U.S.), while magnetic cards cost about NT$3 to NT$6.

According to Hsieh, Chang Hwa will replace more than 2 million ATM cards at a total cost of more than NT$70 million ($2 million U.S.), a cost that the bank sees as impossible to pass on to customers in today's highly competitive financial market.

Although the Bankers' Association allows banks to decide on their own whether they will charge clients for new IC cards, its secretary-general, Kuo Yu-chyi, said that it is unlikely that banks will charge clients.

"It's a matter of survival," Kuo said. "If banks charge their customers for IC cards, the customers will choose other banks."

Hsieh said in addition that new IC cards may cause problems for users who travel abroad.

Travelers may find it inconvenient to use IC cards in countries where ATMs have not been upgraded to read them, he said.