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Chip and PIN goes national

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Plans for the national rollout of a more secure method of authorising credit and debit card payments were announced today.

The Chip and PIN scheme is designed to make credit and debit card purchases more secure by asking the majority of consumers to enter a four digit PIN code instead of signing to verify card transactions by 2005.

Confirmation of the rollout and release of the plans follow a successful chip and PIN trial in Northampton this summer. The first chip and PIN cards outside Northampton arrive in the UK this month.

The rollout, which is being billed as the biggest UK financial changeover since decimalisation, will happen simultaneously across the country and not region by region.

Card companies estimate that one in five cardholders are expected to have chip and PIN enabled cards by Christmas this year. By spring 2004, half of all UK cardholders will have chip and PIN cards and they will be asked to verify one in three transactions using the new system. By the start of 2005, 90 per cent of the UK's 42 million cardholders should be using chip and PIN enabled cards.

At that point 440,000 of a total of 550,000 bank-owned tills should have switched over to the new system, according to the co-ordinators of the project.

Amanda Miller of the British Retail Consortium commented: “The rollout is a huge task with more than 850,000 shop terminals, 122 million cards and 40,000 cash machines being upgraded and 2.7 million retail staff being trained, so it won’t happen overnight. There are household name retailers in every sector who are committed to making this happen by the end of 2004.”

New chip and PIN cards will be issued and tills switched over according to the individual plans of the banks, building societies and retailers. Cardholders do not need to do anything now as card companies will contact them when they are ready to issue new cards.

Will smart credit just push fraud onto the Net?

Smaller merchants, in particular, have expressed doubts about the cost of the scheme and its effectiveness at combating cardholder-not-present fraud.

In May, the Federation of Small Businesses (FSB) called on banks to raise awareness about the scheme and to assist businesses that don't currently rent equipment to upgrade their equipment.

There are also concerns among merchants that as chip and PIN takes off, fraudsters will just use the Internet and telephone instead.

Some fear that the scheme might shift liability towards consumer in cases of disputed transactions.

Backers of the scheme say argue that chip and PIN cards are inherently more secure. They point to favourable consumer feedback from the Northampton trials.

Sandra Quinn from the Association for Payment Clearing Services (APACS) said: “We tested chip and PIN earlier this year and there is a real appetite for the new system among consumers. More than eighty per cent of people in the trial said they were in favour."

The UK chip and PIN programme is part of an international initiative to tackle plastic card fraud. A similar domestic PIN-based system for debit cards in France has seen an 80 per cent reduction in fraud since its introduction ten years ago.

Card fraud is one of the fastest growing crimes in the UK. A record £424.6 million of fraud was committed on UK cards in 2002, up from £411.5 million in 2001, according to APACS.

Counterfeit card fraud is the biggest category, accounting for £148.5 million stolen in 2002, followed by card not present fraud (£110.1 million) and lost and stolen cards at £108.3 million. ®

External Links

Chip and PIN Programme - "the biggest consumer project since decimalisation"
"Annual card fraud figures reach record high", APACS report (PDF)

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Smart credit card scheme kicks off in the UK
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Chip and PIN: not enough to beat card fraud
Smart credit on UK cards. Will it cut fraud?
Joe Public blames banks for credit card fraud
Credit card firms 'profit from Net fraud'
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