Regulator has its hands tied as consumers reluctant to replace their outdated cardsKorea’s financial regulator hit a snag in implementing an overhaul of the credit card system to replace magnetic strip cards with those with an integrated circuit.
The Financial Supervisory Service announced in late January that it would push for the change, but confronted problems, such as consumer complaints and the absence of mandatory measures.
The FSS said the planned change that would bar consumers from using magnetic strip cards is intended to reduce security risks. But the majority of bank customers are unaware of the type card they are using and see no urgent need to change them.
The FSS conducted a field survey on Tuesday, checking the usage of credit cards with magnetic strips at major banks and credit card firms. Of 49 million cards issued here, some 9 million cards are estimated to be based on magnetic strips.
On Friday, the regulator took a drastic move to block the use of magnetic strip cards for automated teller machines, which sparked a spate of complaints from consumers who were not prepared for such a sudden implementation of the new system.
Bowing to public outcry, the FSS delayed the implementation of the new policy that allows for only IC-based cards until June.
Although consumers are now given three more months to update their credit cards, officials at banks and credit card firms predict the turnout will be minimal.
At the heart of the problem is that there is no effective tool to get people to go out to the banks in person and have their cards replaced.
Financial companies, spurred by the FSS, sent text messages, emails and paper-based notices to their customers, calling on them to opt for IC-based credit cards, but voluntary participation is at a disappointing level.
Asking customers to replace their cards by telephone is also shunned because of the problems related to voice phishing.
Under the current system, customers can use credit cards with magnetic strips to purchase goods and services without any disadvantage.
The FSS, however, continued to stress that customers should replace their outdated cards, citing the fact that the chipless magnetic cards have been getting much of the blame for security holes.
Though the IC card was introduced in the local market in 2003, customers have been slow to switch to the new system.
By Yang Sung-jin (
insight@heraldcorp.com)
