Vietnam's domestic bank cards will be converted to chip cards to increase security and function. Photo by VnExpress/Anh Tu.

The firm (NAPAS) recently released Vietnam’s first chip card of EMV standard with more security features and less vulnerable to fraud. NAPAS is Vietnam's leading payment technology company with the State Bank of Vietnam (SBV), the biggest shareholder, holding 49 percent of its charter capital.

EMV (originally Europay, Mastercard and Visa) is a jointly developed global standard that allows interoperability between various cards with computer chips and terminals used by the major financial services companies.

NAPAS said the first seven banks that have started issuing chip cards from early this week are Vietcombank, BIDV, Vietinbank, Agribank, TPBank, Sacombank, and ABBank. Together they account for 70 percent of the 76 million cards used in the country.

The lenders told VnExpress that in the first phase the replacement of the old magnetic cards would be done free of charge.

"The application of chip cards would help Vietnam get out of the pit of card crimes," SBV Deputy Governor Nguyen Kim Anh said.

Pham Tien Dung, head of the central bank’s payment department, said besides reducing the risk of theft and fraud, chip cards can store large amounts of information and be used to pay for transport and public services like in developed countries.

According to NAPAS, because magnetic cards are easy to copy and lack security features, it is easy to steal information from them. In recent years card skimming has become a big problem in Vietnam.

As information theft became rife, international card issuers urged Vietnamese banks to switch to chip cards meeting EMV standards.

Security experts warned that Vietnam’s delayed transition to chip technology could put the country at risk of becoming a haven for card criminals around the world since it was among the few remaining countries still using magnetic cards.

But some banks are worried about the cost of the transition. Besides $1-2 for each chip card, they also have to ensure their ATMs and core banking systems are upgraded to adapt to the change.

According to the SBV, Vietnam has more than 18,600 ATMs, nearly 261,000 points of sale (POS) and around 76 million cards with magnetic strips. Since most POS have complied with EMV standards conversion to chip cards will not affect payment transactions.

Earlier this month the SBV unveiled a plan to convert 30 percent of all cards to chip cards this year. Banks have to increase the ratio to at least 60 per cent by next year.

The plan is to completely switch to chip cards make all ATMs and POS compatible by the end of 2021.