Shoppers start to PIN down the fraudsters

Sam Dunn reports on the new point-of-sale technology that promises greater protection for users of credit and debit cards

hristmas shoppers are among the first to be trying out the new "chip and PIN" technology, with thousands of Safeway customers across the country no longer having to provide their signature at the checkout when paying with credit or debit cards.

Chip and PIN technology enables users to insert their card (carrying a microchip) into a small machine at the point of sale. They then have to tap in a four-digit personal identification number (PIN) to prove who they are, rather than signing on the dotted line.

Some 27,000 chip and PIN transactions were recorded across nearly every one of Safeway's 482 stores last week. This puts the store well ahead of its bigger rivals: Tesco, the UK's largest supermarket chain, hopes to install all the necessary hardware by May at the earliest.

But despite the trail blazed by Safeway, the arrival of chip and PIN technology on the high street isn't happening fast enough to stop fraudsters filching millions of pounds this Christmas by scrawling false signatures that are often barely glanced at by shop assistants.

The predictions of Retail Logic, a payment software supplier, under- line the scale of this crime. The firm estimates at least £50m will be lost in retail fraud between 1 December and Christmas Day. This is usually the result of cards being stolen or the details "skimmed", when the customer's back is turned, and then used to make up a fake card.

If chip and PIN is not available across the country by the end of next year, £1bn will be lost to fraudsters, according to the Association for Payment Clearing Services (Apacs).

Credit card suppliers have been particularly keen to tackle the crime as they have had to bear the cost of fraudulent transactions, and not the consumer. So, in a bid to get retailers to install the systems which can read chip and PIN, 1 January 2005 has been dubbed "incentive day". On this day, liability for card fraud will shift away from the banks and on to the high- street retailers where the fraud has taken place.

Despite the obvious advan- tages of meeting this deadline, the speed at which the technology is introduced across the country is likely to vary hugely. Music retailer HMV says none of its stores yet have the capability to take chip and PIN, though it aims to have the system up and running early next year. "It's not just a question of the technology, it's the training and staff induction," says a spokesman.

Marks & Spencer should have all the equipment in place by July, though that doesn't automatically mean customers will be able to use the machines straight away. That will depend on whether they have actually got one of the new cards.

According to Apacs, which is helping banks adapt to the new system, most lenders are in the process of sending out the cards, with an estimated one million already in circulation. Lloyds TSB and NatWest customers will automatically receive a chip and PIN card when their old one is either lost or expires.

Most banks will be writing to customers in the next few months to explain the change and what it means for account security. By the end of next year, most customers can expect to have a chip and PIN card.

Anybody who uses a debit card will be familiar with the PIN system at cash machines. However, it's important to remember some basic security measures, according to Apacs spokeswoman Sandra Quinn. "Don't write down your PIN and keep it next to your card; handing that over is like giving somebody the keys to the safe," she warns.

If you have a number of four-digit PINs to juggle with and feel you have to write some of them down, keep the details safe and in a separate place from your cards.

There will be a period when both regular signatures and chip and PIN can be used at the till, although bigger retailers are expected to phase out signature payments sooner than smaller shops and other outlets such as petrol stations.

For more information on chip and PIN, go to the website www.chipandpin.co.uk