Sunday, April 21, 2024

Tech Talk: A ‘huge error’ shutting down CARIFS


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The shutting down of the Caribbean Integrated Financial Services Inc. or CARIFS system was a huge error on the part of financial institutions in Barbados.

Just like Trinidad has LINX and Jamaica JETS, at the time of its creation, CARIFS provided the central switching mechanism for transactions among banks in Barbados, allowing local settlement of transactions from Automatic Teller Machines (ATMs) and Point of Sale (POS) devices.

An argument was put forward that the magnetic stripe cards were not secure after some breaches at ATMs, using covert cameras and card skimmer devices. The banks were enticed by the chip-and-pin mechanism of the debit card offerings of VISA and MasterCard.

However in doing so, transactions were now being switched and settled by these international electronic payment giants, leaving consumers at the mercy of their fees. With local ATM usage fees as high as $4 and up before being capped at $3 by the Central Bank, POS transaction fees at 2% and up, this is a far cry from the $1 per transaction at ATMS and 25 cents per transaction for POSs.

In an effort to escape these fees consumers are now forced to drive around and use their own bank’s ATMs, a return to the pre-CARIFS days when merchants had a POS terminal for each bank. Also, consumers are finding it difficult to recover monies from failed transactions at ATMs in the case where an ATM only partially or does not dispense cash. This was handled quickly before by CARIFS; the process is now not as straightforward.

So while there has been a call for banks to reduce their fees, that call will be futile as this is a response to the fees that they are now forced to pay to VISA and MasterCard, and are thus just passing them on to the consumer.

The irony of the situation is that there has now been an exponential increase in fraudulent transactions using these new cards. These cards have been tied to the checking and saving accounts of consumers, some who are seemingly unaware that using your debit card online exposes it to international fraudsters in the same manner as credit cards.

It is one thing for your credit card to be blocked and replaced if fraud occurs. It is a different ball game altogether for your debit card to be blocked. In some cases, this is the only means of accessing your account to obtain cash or pay for services at the point of sale outside of banking hours. It is also costing the financial institutions more in order to replace these cards, additional costs that will inevitably be passed on.

The feature is not used online, in some cases not even the card verification or CVV value, the 3-digit number at the back of the card to process a transaction. All that is required is the card number and the expiry date. While a credit card would have had a limit, fraudsters now have direct access to savings accounts with varying limits.

The tap-and-go feature of the cards is also problematic, as this allows some transactions below an agreed limit to take place at a terminal without the customer entering a pin. Some cardholders discovered that this limit actually needed to be set at some institutions.

It is not too late to reverse this blunder. CARIFS should be restarted, if even not in its original form. The credit unions unfortunately have also been duped into switching to these cards, exposing their members now to the same challenge.

The concept of CARIFs, where all the financial institution switches were connected to a main local switch, could be replaced with an internet based secure switching mechanism if necessary. We started with modems and leased lines before there was the internet. All CARIFS required was an update of its platform. The technology may change and advance, but the overall concept does not change in terms of all the banks being interconnected locally. It is baffling to understand why there was never an app launched by CARIFS to take advantage of the new Fintech payment options in the market.

The criminals physically came to Barbados to rob us before, and we nabbed them by being vigilant at our ATMS. Now we’ve gone to them, rolled out a welcome mat and opened the doors to our hard earned savings to the entire world.

Terry Jones is the Group ICT Manager at The Nation Publishing Co. Ltd.


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