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Retailers must embrace Chip and PIN. Or else

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Businesses that do not adopt the "Chip and PIN" payment system from next year could be held liable for losses resulting from credit card fraud, an accountancy body warns.

From 1 January 2005, the Chip and PIN system, which replaces signatures for card payments with a "hacker-proof" four-digit PIN number, will be introduced across the UK.

The decision, which follows a successful trail of the system in Northamptonshire last year, is aimed at cutting spiralling credit card fraud in the UK, which is estimated to cost the economy £424m a year.

However, the Association of Chartered Certified Accountants (ACCA) said that the new rules also stipulate that retailers will be held liable for losses if a Chip and PIN card is used fraudulently at a terminal that it not Chip and PIN-enabled.

ACCA warned that small firms now have just nine months to ensure they install Chip and PIN systems, or risk being targeted by con artists.

John Davies, head of business law at ACCA, said that it was vital that all businesses that accept credit and debit cards understand the implications of this liability shift.

"If businesses have complied with card issuers’ instructions and cardholders have been successfully authenticated, then retailers will not be liable if a transaction is later found to be fraudulent.

"However, those retailers who choose not to adopt the Chip and PIN system will be held responsible and, as a result, are likely to become the focus of attention for credit card fraudsters.

"With less than nine months left until the full introduction of this scheme in the UK, many businesses will need to act swiftly to ensure that updated and compliant point of sale equipment is installed and their staff adequately trained," he said.

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