The move means that the 940 million benefit payments made each year, which account for one-third of post office counter transactions, could eventually be paid through 'swipeable' cards rather than benefit books.
Last year Mr Lilley had to retreat from attempts to cajole more people by stealth into accepting payments through bank accounts in an attempt to cut the pounds 550m bill for paying the benefits through post offices. That, the National Federation of Sub-postmasters said, could have closed 5,000 of the 19,000 sub-post offices.
Yesterday, Mr Lilley offered a three-pronged strategy, starting with the extension of the use of bar codes on benefit books.
In the longer term, perhaps within three years, computer terminals should be installed in all post offices and over about five years the 57 million order books issued annually could be replaced by 'swipeable' payment cards.
The moves had been recommended by a joint Benefits Agency and Post Office Counters Ltd working party, Mr Lilley told the sub-postmasters' annual conference in Bournemouth.
He said the new system might cost pounds 130m to install, but it would cut out order book fraud which cost pounds 120m a year. It also signalled the Government's commitment to maintaining 'a nation-wide network' of post offices.
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