Fraud drives banks' smart card push

Card fraud and identity theft are driving demand for and cutting the cost of smart cards in the financial sector, analysts claim.

Successful smart card projects in other industries, such as contactless payments at toll booths, have convinced banks to migrate to smart cards from traditional magnetic strip cards, a Frost and Sullivan report says.

Deadlines set by MasterCard and Visa for a switchover and a liability shift for fraud payouts were highlighted as other key reasons for the move to smart cards.

The analyst said banks are rapidly adopting contactless payment cards, such as MasterCard's PayPass and Visa's Visa Wave.

In a statement, Anoop Ubhey, Frost and Sullivan's card analyst, said: "The security features offered through this technology increase consumers' confidence to conduct transactions both online and offline.

"[I]t will act as a key differentiator for the financial institutions and retailers to better acquire and retain customers."