Big two UAE banks not ready for 'chip and pin' debit cards

National Bank of Abu Dhabi seeks a delay to December 31 deadline to implement new security features, while Emirates NBD says many of its cards have not yet been upgraded.

NBAD said an overhaul of its systems makes the migration to the "chip and pin" impossible to achieve by year end. Christopher Pike / The National

The UAE's two biggest banks have warned that they are not yet ready for a December 31 deadline to introduce chip and pin debit cards.

National Bank of Abu Dhabi customers who expected to receive cards with the new security features by the new year are likely to be disappointed after the lender confirmed it was still not ready for them.

It wants the Central Bank to postpone an impending deadline to implement the technology on debit cards to next year.

Meanwhile, Emirates NBD said many of its cards had not yet been upgraded to use the new security features.

With less than three weeks to go until the deadline, a spokesman said that 85 per cent of the bank's active debit cards had been upgraded.

"As the largest issuer of debit cards in the UAE, we began issuing chip and pin debit cards in 2009 and are on our way to completing this process," said Sivaram, cards business head at Emirates NBD.

Last year, the UAE began a "national migration" to chip and pin, a security mechanism that limits the risk of fraud. At the time, the Central Bank said all lenders should comply by the end of this year.

But NBAD said it was not yet ready for the upgrade because an overhaul of its systems was still in progress.

The matter is under discussion between the Emirates Banks Association and the Central Bank to extend the deadline to next year, said Navneet Dave, NBAD's chief for credit and debit cards.

"We're still not ready. We've a system upgrade to do, and that's in the process," said Mr Dave.

"The Central Bank is aware that banks cannot upgrade to chip and pin instantly. There are four million debit cards in the country."

Most banks were said to be working towards the upgrade as scheduled, with many lenders, including Mashreq, HSBC and Barclays, already using the new standard.

The Emirates Banks Association declined to comment.

But several big lenders were said to be pushing the Central Bank for a six-month extension to the deadline to July next year, said one banker who asked not to be identified.

A Central Bank circular in December last year said all debit cards were to be upgraded to chip and pin by the end of 2012, with crebit cards to follow by the end of 2014.

This month, NBAD reissued scores of debit cards without the required chips.

That was "related to offering a superior product and new branding", said Mr Dave.

NBAD would replace the newly issued cards with chip and pin-compatible cards "some time next year", he added.

The Central Bank was not immediately available for comment.

It is the second time this year that the bank has sought to delay a Central Bank regulation.

NBAD said in October that it had secured an extension to new Central Bank lending limits capping exposure to government-related entities after a concerted lobbying effort.

But other banks in breach of the limits - including Emirates NBD and Noor Islamic Bank - are still in discussion with the Central Bank over the issue.

Regulations on consumer lending issued last year were also delayed and watered down last year.

Retailers have switched their point-of-sale terminals to be compatible with chip and pin, to comply with a March deadline.

Banks had already provided them with the necessary terminals to ensure that retailers could meet the new Central Bank requirements, said Ishwar Chugani, the managing director of Giordano, Middle East

"It is a matter of just changing the machine," he said. "It's business as usual."

Some 30.6 million point-of-sale transactions took place last year, representing Dh11.2 billion (US$3.04bn) of transactions, according to data from the Central Bank.

Emirates NBD is the biggest point-of-sale terminal vendor in the country, followed by Mashreq and National Bank of Abu Dhabi.