Costly error
January 7, 2010
German banks have been inundated with customer complaints after a software glitch rendered millions of checking and credit cards unusable in a variety of cash terminals in the New Year, a bank spokesman said on Wednesday.
The banks are hoping software experts will be able to develop a program capable of instantly re-programming the faulty cards' microchips when they are inserted in an automated teller machine (ATM).
If that doesn't work, banks may be forced to spend as much as 240 million euros to replace all 30 million cards containing a new anti-fraud microchip that does not recognize the year 2010.
The ZKA national credit panel said banks will make a final decision on what action to take within the next few days.
It's a problem that nobody saw coming, according to Thomas Schlueter from the Association of German Banks.
"It could be that these cards were already on the market for years so they were working fine from 2008 to 2009 for instance. But they had a problem with the figure 2010, and I think that was a problem that nobody was really aware of," Schlueter told Deutsche Welle.
Problem not widespread
Only banks using the French card supplier Gemalto were affected by the software glitch, and of the 30 million cards issued, only a fraction actually encountered problems.
Gemalto said it was working with its German clients to develop "a corrective process that avoids the replacement of the affected cards."
According to ZKA, only one batch of the microchips was causing problems. The new anti-fraud technology in the chips was created by EMVCo.
Meanwhile, banks have been blamed for not providing their clients with enough information.
"The banks' handling of this has been disastrous," banking expert Manfred Westphal told German radio broadcaster Deutschlandfunk. "I need to know as a bank customer, first: Does this problem affect my own card, and if so, exactly which functions are affected?"
"The banks do not tell you. And so many Germans will now go on their winter holiday to Switzerland, for example, and find that they cannot obtain any money with their ATM cards," Westphal said.
Retailers concerned
There has also been some concern about how the system failure will affect the broader economy, as many people are unable to withdraw cash or pay at the till. Some have even had their cards 'eaten' by the automated teller machine after the faulty software determined they had expired.
Now the German retail industry is calling on banks to compensate traders for lost earnings.
"We have angered customers and lost revenues through no fault of our own," Stefan Genth, head of the Association of German Retailers, said on Wednesday.
In total, about 20 percent of one-million retail point-of-sale terminals were affected by the glitch that officials say is similar to the "Y2K bug" that triggered concerns at the turn of the century. Exact figures as to just how much damage this latest fault has inflicted on shopkeepers are not yet available.
However, Schlueter believes any harm to retailers was minuscule.
"Most of the systems that are running in the retail sector are still using the magnetic stripe (as opposed to the microchip). So we have still got these on the cards as a fall back system," he said.
The banks worst hit by the glitch were Germany's dominant public-sector savings banks and cooperative banks, but client of private lenders such as Postbank and Commerzbank also reported problems.
Author: Vanessa Johnston
Editor: Sam Edmonds