New technology pins down card fraudsters

New chip and PIN credit and debit cards look set to drastically reduce fraud.

Plain Words reports.

Signing a slip when you pay for goods with credit and debit cards will soon be a thing of the past. A new anti-theft system called chip and PIN is being introduced and is expected to replace signature transactions completely by the end of next year. Currently, banks and building societies are pushing to get eighty per cent of all retailers using the system before the year is out.

In a typical supermarket the chip and PIN system works like this: each check-out has a handheld PIN pad which is linked to the till. Once your shopping has been scanned, the cashier places your credit or debit card in a slot at the top of the pad. You are then asked to key in your secret four digit PIN number.

A small shield prevents anyone else seeing your code - even the cashier doesn't know what it is. Once you've pressed enter, a message tells the check-out assistant if your PIN number has been accepted and your card is returned.

The process is quick and simple. And in many respects is easier than signing your signature (so long as you don't forget your PIN number).

Time saving

It also makes life easier for the retailer. Haidar Lalji, a newsagent based in the Turnpike Lane Underground station in north London, had a terminal installed by Barclaycard Merchant Services in March. Lalji said using the keypad makes the whole process more secure and saves a lot of time: "You had to wait a minute and a half before. This takes less than a minute because they don't have to sign."

Lalji also said the chip and pin machines means he no longer has to store as many paper receipts as he did previously - retailers have to keep the receipts in case a customer queries a purchase and card issuers request evidence of the transaction.

Less paper trail

A Barclaycard spokeswoman confirmed: "The new system will mean they will not have to retain all the receipts they do at the moment. But they will have to retain the signature receipts until all transactions are chip and pin."

Barclaycard recommends retailers keep receipts for seven years as customers can query a transaction up to six years and one day after they have taken place.

So far, 167,000 shops have had the terminals installed. The £1.1 billion investment is designed to cut down shop counter card fraud, which last year cost card issuers £195m.

Sophisticated processing

The Association of Payment and Clearing Services (APACS) says this is the big advantage of chip cards - they provide much greater security compared to the current system. Chip technology uses highly sophisticated processing to identify genuine cards, making counterfeiting extremely difficult. APACS expects all 100 million debit and credit cards in the UK to be reissued with the embedded microchips in the next two years.

Perhaps the only downside to the system is, given a year or so, most of us will forget how to sign our names. Especially if we write e-mails rather than letters (as most of us do today). But that is the way of the digital revolution.

April 20th, 2004
Plain Words editorial