Card payment system up for change

By Choi Kyong-ae

Financial regulators said Friday they will have small stores replace their existing hacking-prone magnetic strip readers with hacking-proof integrated circuit (IC) ones for credit card transactions.

Credit card companies such as Shinhan Card, KB Kookmin Card and NH NongHyup Card will financially help 650,000 mom-and-pop stores buy the necessary equipment by 2015, said an official at the Financial Supervisory Service (FSS).

It will take up to 300 billion won ($290 million) to replace all card strip readers at small stores.

In addition, larger shops will be urged to use only IC readers from the fourth quarter of this year, the official said asking not to be named.

“The FSS will have credit card companies give financial support worth 100 billion won to help complete the replacements next year,” he said.

In the latest leak incident, hackers were found to have stolen the information of more than 200,000 customers who paid for their purchases through strip readers, according to the FSS.

“If a customer pays his or her purchase with a credit card at a supermarket which uses the point-of-sale (POS) terminal for settlement via a strip reader, it is very vulnerable to hackers,” the FSS official said.

In December, police arrested a group of hackers who stole 3.2 million credit-card transactions made on POS terminals. Of them, the information of 205,000 card holders was sold and 268 holders suffered 120 million won in financial damage, he explained.

Leaked information includes names, telephone numbers, credit card numbers, card expiration dates and passwords.

The FSS has ordered all the credit card companies to upgrade their fraud detection systems (FDS) in order to ensure such thefts don’t happen again. If the companies spot any possible leak, they are obliged to report it to police right away, the FSS said.

Credit card firms are planning to issue IC cards to all their customers in the near future. They are also strengthening monitoring of their FDS around the clock, said the Credit Finance Association of Korea (CREFIA).

“The financial authorities will ask card companies to offer free text messaging services to card users for settlements worth more than 50,000 won as early as May,” a CREFIA official said. Currently, card holders pay 300 won per month for the service.