In Split Chile, Internet Banking Trumps ATMs

This was a typical week in Chile. 100,000 students took to the streets in the capital to demand that university education be free and that the state take over the municipal schools, because schools run by the individual towns and communities are of dismal quality, they say. The students have been protesting like this for three years. Their protest is peaceful but troublemakers always use these occasions to wreak havoc, bashing in storefronts and looting stores, setting up burning blockades in the streets, and tearing down stop signs and stop lights. The riot police respond with water cannons and tear gas; clouds of gas flow over everyone – children and asthmatics as well.  The criminal elements hide their faces by wearing hoodies, so the police tried a few weeks ago to shoot them with paintball guns so they could later run down the people who had been painted pink. But the police backed away from that strategy when one girl had her eye put out by a paint ball.

Students across the country have taken over the schools expelling the teachers -- in the US it usually works the other way around.  The students climb the fence in the middle of the night, padlock the front door then proceed to stay there day and night sometimes for months at a time. This is the case even at the number-one public school in the nation. Elections were held last week, so the police had to expel the students from their polling places, but the students went right back after the voting had finished.

The Chilean government likes to say that Chile will be the first developed nation in Latin America. Witnessing the mayhem on the streets and the vast gap between rich and poor, one wonders if that will be true.  But in their favour, one can observe that Chile recently joined the Organisation for Economic Co-operation and Development (OECD) along with the latest entrants, Iceland and South Korea. And next year Chile will be the first Latin American nation to join the US Visa Waiver program, meaning their citizens will be allowed to travel to the US without having to apply at the US embassy for a tourist visa (a cumbersome process which often leads to denial). Plus, the middle classes here are seeing their incomes surge. Unemployment is at an all-time low.

Besides the school system, there is one segment of Chilean culture which is rock solid: that is the banking system. Chile’s government bonds have the same rating as Japan. Chilean banks are considered some of the safest in the world.  The country's coffers are filled with US dollars as Chile has 70% of the world’s supply of copper and almost no debt.

For the poor people here, life is sometimes bleak; they have to line up to pay bills instead of using the internet. Most people have debit cards and debit card accounts, even poor people, but only the upper middle class and upper class can obtain checking accounts.

The notion of “class” is very-well defined here.  The people on television are the light-skinned people who live in the wealthier neighbourhoods, while 80% people of the people in the country are ‘morena’, meaning they have brown skin and usually jet-black hair. Money follows the richest families and upward mobility is difficult. People of different classes, for example, holiday at different beaches and the children of lower-class people are not welcome at many of the elite private schools.

One would have to say that Chile lags behind the US in many ways, yet there are certain systems here which work better than the US, like the banking and healthcare systems. Regarding banking, you cannot yet make payments from your mobile phone here like you can at Starbucks and Target retail stores in the US, but there are other ways in which the banks system is superior.

In Chile, it is easy to send someone money using the internet and it costs nothing. People often do this when, for example, someone picked up the bar tab last night and you need to pay them back. In the US, bank-to-bank transfers are a lot of trouble and include steep fees. There, to send someone money you have to use PayPal, which only works if both people have PayPal accounts, and then there is a fee. In Chile, all you need to know is that person’s national ID number and their bank account details. Then you can send them cash and it arrives instantly. There are no fees for this and there are no fees at the ATM either, also unlike the US.

The Chilean money transfer system is secure, because it is protected by three levels of authentication. First, you have to log in to your bank website. Then the bank sends a code to your mobile phone, and finally you type in a code from a card that you carry in your wallet and the transaction is complete.

Josefa Ortiz Oberg is a 24-year-old research assistant. She praises the system, saying: “My parents deposit my monthly allowance using the money transfer system. They live in a city which is far away. So this makes it much easier and accessible. On the other hand, when I am working, the company where I am working deposits money in my account too. It is the fastest and most secure way to get the money into your pocket book.”

One weakness with credit cards in the US and Europe is that all one needs to use a credit card is a valid card number, the code on the back, and the validation date. So it is easy to use someone else’s credit card if you steal their card or they lose it. Just type this data it into a web site and buy something. Yet the banks give back the money when the affected person contacts the bank.  The one who loses is the bank, which of course passes along such losses to their customers with increased fees.

That weakness is plugged here in Chile by a simple mechanism. When you use a Chilean credit card, you have to enter a PIN just as you would with a debit card. That solution is so simple one wonders why more countries do not require the same.

There is one glaring weakness in the system here and that is the ATM machines.  Thieves have learned how to replace the card reader in an ATM with their own recording device and a camera. So when you insert your debit card, you are unwittingly handing over your debit card number to thieves. They obtain your PIN from the tiny camera they have installed when you type in your number.

Paola Andrea Zepeda Valenzuela, 42, is an attorney in Santiago who was a victim of this type of crime. Thieves stole $400US from her account, the maximum one can retrieve from an ATM per day. Because she has a normal debit card account and not a checking account there was no option to buy insurance, so the bank was not obligated to return the money. Had she had a checking account she might have had insurance to protect against a loss like this. This type of theft could be a disaster for someone in a country where the minimum wage is $380 USD per month.

Paola said, “Being a lawyer, I feel violated in my rights because I know the legal issues surrounding this. I understand perfectly well that for the amount which was stolen there is the possibility to recover my money. When I went to the branch, the bank said they could not help me because they are not responsible for how their cards are handled, they said. They told me I could take legal action. But I know as an attorney that it is possible that following the legal process would not necessarily get my money back. For the Chilean justice system, especially for the prosecution of crimes, this type of small crime is less important than others that they investigate.”

ATMs are also targets of other crimes. Almost daily, the night news shows thieves robbing the entire ATM. They back up their stolen vehicles to the bank, bash in the window, then jerk the ATM right off its foundation with a chain and haul them away to be cracked open. The banks here are for whatever reason not willing to stop this crime by deploying such simple techniques as spraying the money with dye when the machine is attacked.

So despite its advances in the standard of living and its quite useful ability to transfer funds from one person to another, Chile is an almost-developed nation plagued by third-world problems.


Walker Rowe is a US citizen living and working in Santiago, Chile. There he edits the online magazine and is currently writing a book about the pollution of the coast of Chile.


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Walker Rowe

Walker Rowe is a US citizen living and working in Santiago, Chile. There he edits the online magazine and writes the blog "The Avocado Republic" about life in rural Chile.

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