With credit card fraud costing the industry more than £1m a day, plastic providers are finally taking action. Banks, building societies and retailers are joining forces to introduce the chip and PIN programme, expected to halve card fraud in the UK.
A pilot scheme launches in Nottingham next month, and is set to be rolled out across the UK. American Express, Barclaycard, Egg, HSBC, Mastercard, Royal Bank of Scotland, Switch and Visa are among the companies participating in the trial.
By the end of 2004, it is predicted that most of us will be using chip and PIN, which offers more security for consumers. The new cards will come with an embedded microchip instead of a magnetic stripe. When you make a purchase, the cashier will insert your card into a machine; you will then be asked to check the amount on the screen and to tap in your four-digit PIN (personal identification number) to confirm the sale. At present, personal credit cards are most vulnerable to fraud when their details are copied after the plastic is taken out of the customer's sight to be swiped through a machine.
Visa says chip-embedded cards should also make authorisation quicker than at present, speeding up transactions. Customers receive a printed confirmation of the purchase; the card isn't swiped and there is no receipt to sign.
The introduction of the new cards is long overdue. France has operated a similar system for the past 10 years, resulting in significantly lower levels of card fraud than in the UK, where it costs the industry £424.6m a year, according to Visa.
Last year, counterfeit card fraud alone resulted in losses of £148.5m, reports the Association for Payment Clearing Services (Apacs). The next biggest problem was "card not present fraud", usually involving transactions over the phone or internet, which cost the industry £110.1m. And lost and stolen cards accounted for £108.3m.
Cardholders don't have to take any action or apply for an embedded microchip card. Most providers will automat- ically supply one when your current card is up for renewal, or at the very latest by the end of 2004. Some cards already have chips, which were first introduced in 1999.
The chip and PIN system is built to an international standard and other European countries are now planning to implement it.
"Enough is enough. We've seen fraud rise for several years and that's why the UK's banks, building societies, retailers and card issuers have come together to introduce chip and PIN," says Chris Pearson, chief executive of Apacs. "More than £1m of card fraud is committed every day. That's a fraudulent transaction every eight seconds."
Plastic addicts and a new fix
* Each Briton carries an average of seven plastic cards, adding up to almost 330 million in use around the UK.
* If you think that's way more than you have, don't forget reward, national insurance and donor cards, driving licences, and gym, video and breakdown recovery memberships – not to mention your store, debit and credit cards.
* Nearly three-quarters of us would prefer a single debit or credit card that could be used for a variety of purposes.
* By the start of 2005, all of us will be using chip and PIN. Eventually these cards will be multi-functional as they will also store loyalty points, air miles and personal data, and allow chip-enabled web access.
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