The chip and PIN insecurity card

Point of sale theft

By John Leyden • Get more from this author

Posted in Enterprise Security, 20th December 2004 16:59 GMT

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Updated A supposedly more secure method of authorising credit cards transactions in the UK may play into the hands of fraudsters, a leading IT security expert warns. A banking industry organisation says such fears are misplaced.

Chip and PIN began in October 2003 and is designed to make credit and debit card purchases more secure. Customers are asked to enter a four-digit PIN code instead of signing to verify card transactions. Newly-issued credit and debit cards will come with smart chips to recognise this PIN number when transactions are processed. Up to 130m new Chip and PIN cards will be sent out by the end of the year, at which point retailers who haven't introduced the new scheme become liable for fraudulent transactions.

Professor Ross Anderson, from Cambridge University, warns that the system could make it easier for crooks to capture vital security codes. "Now we're all being trained to use our pins at the point of sale it's a simple matter to set up a market stall and capture card and pin data. They can make up forged cards and use them, for example, at cash machines," Anderson told the BBC.

Recently, fraudsters have upped their efforts to harvest PIN details of potential victims by using fake ATM machines and other technical trickery. However, a spokesman for banking organisation APACS, said that fraudsters lack the resources to fabricate counterfeit Chip and PIN cards, which would be far more expensive to produce. He added that the earlier introduction of Chip and PIN-style schemes in France had led to a 80 per cent reduction in card fraud.

Anderson's concern is that once a fraudster knows a PIN, they don't need to copy the chip. All you need is to copy of the magnetic strip and use the card in an ATM that only reads the strip. These type of ATMs are common outside of the UK. This is possible because the same PIN is used for the Chip and magnetic strip on a UK card. ®