WINNIPEG, Manioba and FRASER VALLEY, British Columbia — A pairof Canadian credit unions has taken the law into their own handsand those of their members.

Cambrian Credit Union in Winnipeg, Manitoba and Mt. LehmanCredit Union in British Columbia's Fraser Valley started sendingout e-mail alerts last year to members' mobile devices whenevertheir debit cards were swiped at a retailer's point-of-saleterminal or inserted into an ATM.

The initiative is the central prong in their efforts to tackleone of the biggest issues facing the banking sector today on thisside of the Atlantic Ocean–card skimming. Despite double-digitgrowth of debit card fraud over the past several years, theindustry has been surprisingly slow to adopt new technologies tokeep cards, and the money they can access, out of the wrong hands,says Connie Clarke, vice president of systems and administration atCambrian.

She says the magnetic stripe technology used in North America isprehistoric compared to the chip cards that have been used byEuropean financial institutions for a number of years.

“Criminals take the path of least resistance. If it's harder [todo] in Europe, they come to Canada and the U.S.,” she says.“Skimming is a significant problem for everyone. You don't want itto undermine the credibility of the direct payment network. Youdon't want people to be afraid to use their cards.”

Members at Cambrian and Mt. Lehman are required to sign up forthe service, which sets parameters for the alerts, such aspurchases or withdrawals over a certain dollar amount or the timeof day of use.

Clarke says if a member gets an alert and knows they didn't usetheir card, they can log in to their account online to see what'sgoing on. If some illegal transactions are indeed taking place,they can cancel the card themselves with a click of a mouse. Ifthey're not near an Internet connection, they can call a toll-freehotline and accomplish the same goal.

Gene Blishen, general manager of Mt. Lehman, says it only takesa few seconds once a member's card has been swiped for its systemto send out an alert.

“A lot of times the cashier will give you the receipt and yourcell phone will go off at the same time. [The alerts] give a senseof security to people, especially older people who didn't want touse a bank card. They bought into it right away, they feelconfident with it,” he says.

Both institutions and many of their peers are anxiously awaitingthe results of this fall's pilot project of chip cards, which willtake place in Kitchener-Waterloo, Ontario, a community of about300,000 about an hour south of Toronto.

Kirkland Morris, assistant vice-president of strategic policyand programs at the Interac Association, which oversees Canada'sdirect payment system, says chip technology is vastly superior tothe magnetic stripe because the built-in security features make thecard's data much more difficult to copy or otherwise obtain.

“You're really putting a small computer in the wallet of everydebit card holder in the country,” he says. Once the pilot projectis completed, banks and credit unions north of the border willstart issuing chip cards and rolling out chip-enabled ATMs over thenext two to three years with the goal of transitioning the entiredirect payment system, including retailers, to chip technology by2015.

Morris stops short of saying card skimming will become a thingof the past once chip cards flood the market. “I would be hesitantto say anything is impenetrable. Chip technology provides us with ahuge leap forward in terms of security. It allows us to evolvesecurity within the new technology. Each time you get a new debitcard, it can have more security features than the one it replaced,”he says.

Brian Fisher, Pittsburgh-based risk manager of the CUNA MutualGroup, the leading financial services provider for credit unionsand their members in the U.S., says he's anxious to see howsuccessful chip cards are in Canada.

Card skimming is a significant problem for credit unions in theU.S., as well, he says. Reported losses grew from US$57 million in2004 to US$89 million in 2005, a growth rate of 56%. The damageslowed in 2006 to 11% making for $98.7 million in losses.

“Plastic cards have really become an area of strong concern forCUNA and credit unions in the U.S. over the past 18 months,” hesays.

He says CUNA is looking for any new technologies and featuresthat can help attack the skimming and counterfeiting problems,including chip cards, biometrics or pay-by-touch.

“There are different technologies out there. We're trying toencourage any use of technology that will help us deal with thatproblem,” he says.

Brian Triplett, senior vice-president of emerging productdevelopment at Visa USA, says while card skimming and otherfraudulent activities are definitely a concern, they only representabout six cents per every $100 transacted. “It's an extremely smallpercentage of our transactions in dollar volume,” he says. He saysVisa is focusing on a multi-layered strategy to protect againstfraudulent use of account data. One element of that is in-flightscoring, which looks at the characteristics of a transaction, suchas the dollar amount, historical use of the card or the type ofstore in which it's taking place, as it's going through its networkto determine if it's legitimate.

He says the country's largest debit brand is also looking atcontactless chip and mobile phone payment technologies. Anotherwork in progress is radio frequency-enabled cards.

“Instead of swiping, you hold it in front of a reader and itshares the information that way. It includes dynamic data for eachtransaction which makes every transaction unique,” he says.“Fraudsters can't get a hold of that information and makecounterfeit cards and they can't use it in other ways, likee-commerce. The dynamic data would recognize that it's a copiedtransaction and we would decline it.”

Triplett says the new technologies will start to emerge in theU.S. in “the next year or two.”

Clarke says while the costs of adopting up-to-date technologycould run well into the hundreds of millions of dollars in Canada,it would be even more expensive to ignore the problem.

“The cost of not having it is rising costs through fraud. Ifyou're not protecting against it, you may as well shut your doors,”she says. –[email protected]