PRESIDENT of the Jamaica Bankers Association (JBA) Septimus Blake said the plethora of attacks on cash couriers and automated teller machines (ATMs) in recent months brings “national risks” which the security forces and the banks must collaborate in solving, even as he presses for transactions to be done using less cash amidst talks of the need for the country to go cashless. Blake said the increased attacks are borne out of desperation in criminals as financial institutions close the loopholes through which certain fraudulent transactions are done.
“ATMs are under constant threat from criminal activities. You see it ranging over time from anywhere from the physical attack to what I call the logical attack where they attack by software,” Blake said in a recent interview with the Jamaica Observer. He said as the gaps are closed, thieves turn to new ways to get money.
“For example, some years ago you would recall thieves were targeting consumers through skimming,” he continued, referring to the past where fraudsters would install devices on ATMs to capture people’s data which would then be used to access monies in accounts.
Bank of Jamaica data support the claim. The Financial Stability Report 2022, which was released in early March and examines up to November 2022, shows that even though card-related fraud at 82 per cent of total fraud losses remains prevalent, it declined significantly as banks introduced EMV chip and pin technology post-2018. The result was that debit card fraud losses declined by an annual average rate of approximately 30 per cent, or $115.8 million, from 2018 to 2022.
“At end-November 2022 debit card fraud losses computed at $0.1 billion, vis-à-vis $0.6 billion in 2018. Credit card fraud losses also reflected notable annual average declines to $0.3 billion at November 2022 from $0.5 billion in 2018,” the BOJ report noted.
Blake said the dip was due to “a couple of things” the banks have done.
“Most of the ABMs have been upgraded — if not all of them — to facilitate EMV, which is the chip and pin which is vastly superior technology to obsolete technology we had with the magnetic strip. And then on the card side, most if not all entities have upgraded to EMV and so we have had a sharp reduction in those incidents of skimming,” he pointed out.
But criminals targeting ATMs, as loopholes close, is not a phenomenon restricted to Jamaica. From Germany to the United States organised crime gangs have been targeting ATMs, and in the US the issue has pushed Congress to address the matter with heftier fines, especially for private ATMs.
“There is no one magic bullet to solve this particular issue,” Blake said. “It is going to require cooperation and coordination between banks — our machine vendors — to combat physical attacks and logical attacks; law enforcement; and our service providers like Beryllium which interfaces directly with the machines to restock or clear a jam.
“The reason there has to be this coordination is because there are national risks,” Blake continued. “It is organised crime, which is a national issue. It’s not going away. It’s going to be ongoing so we have to be vigilant and to find the coordination to work closely together so we can constantly be looking to see where the gaps are to close the gaps and to find the solutions to deal with these things.”
Already the banks have started to assess the risks surrounding the ATMs they have deployed more of in recent times, as branches were shuttered across the country when foot traffic fell and the cost of operating them became too prohibitive.
“One of the things we have pushed at the JBA is inclusion, which is access and usage in simple terms. We want our customers to have access to their accounts and usage so we have over 820 ATMs right across the island, and in recent years we have been putting these ATMs in locations where our customers do their business — even in remote areas. So you would see ATMs in supermarkets, gas stations and smaller towns, which complements the network of branches …subject to telecoms availability. However we have to reassess that — all of us [as] banks.”
Blake, who is also CEO of National Commercial Bank (NCB) Jamaica, has had to close ATMs to mitigate against further attacks.
“At this time, less than 10 per cent of the ATM locations have been closed,” NCB told the Business Observer last month. “This includes two ATMs which were stolen, and two which were vandalised. While we cannot confirm the planned closure of a specific number of ABMs presently, we will communicate any further changes to our customers and stakeholders in a timely manner, with updates on our website, mobile app, and other official channels,” it said.
Blake said the ATMs cost US$40,000 to US$80,000, along with the ongoing costs to maintain them.
“Every time a service provider goes to service a machine you have to compensate them, and it is getting more expensive to do because of the attacks,” he shared, though he said he couldn’t quantify to what extent the costs can be passed on to customers before the service or the product becomes more costly, and so has been increasingly turning to technology.
“Technology has afforded us a couple of things. One, to improve the customer experience, and two, to reduce our cost to serve,” he said.
“People are increasingly talking about going ‘cashless’ but when you look at an ATM, those machines are not cashless — what we have done is leverage the technology to improve the access. The ATMs are a bridge between the digital and the physical.”
He said the shift to using less cash started before the COVID-19 pandemic and has been accelerated since then.
“We are not saying it is going to be cashless — though we’d love that — what we are saying is ‘less cash’. The solutions that we find and deliver have to be better than cash.
“There is an opportunity for the banking sector to develop and deliver e-solutions which are simple, secure, and provide access and convenience. Many institutions are working on how they can leverage digital to enhance the access, the convenience, the affordability of doing transactions,” he continued.
Putting on his NCB hat, Blake told the Business Observer, “In NCB today, up to 97 per cent of financial transactions take place on digital channels.”
For the industry on a whole, he said, if people are to consider using more digital methods to make payments then the banking sector will have to look at driving down the cost of acceptance for digital payments, such as fees associated with using cards.
Innovations include making it easier to use digital payment methods. NCB is now piloting tap-on-phone technology that should be easier to facilitate transactions, but Blake would not say when he expects the new digital transaction method to be rolled out to consumers in Jamaica.