Chip and PIN gathers pace

Preparing for January liability shift

Two in five UK cardholders now have chip and PIN cards, as the progress towards introducing a more secure method of authorising credit cards transactions gathers pace. More than 17m next-generation cards have been used issued to date.

The Chip and PIN scheme, which began in October 2003, is designed to make credit and debit card purchases more secure by asking the majority of consumers to enter a four-digit PIN code instead of signing to verify card transactions by 2005. Newly-issued credit and debit cards will come with smart chips to recognise this PIN number when transactions are processed.

The latest chip and PIN barometer, issued yesterday, shows that millions more UK shoppers have received chip and PIN cards and some of the nation’s biggest retailers are now rolling out the new, more secure technology.

Asda and Dixons are among the high street names starting to deploy the technology at their checkouts. Together, these retailers account for some 20 per cent of all plastic card sales made in the UK, so shoppers will increasingly find themselves using their four-digit PIN, rather than a signature, when they go shopping. In total, 305,000 small businesses (55 per cent) - including shops, restaurants, and bars - have already switched over to chip and PIN.

SME retailer survey fails to tell the bigger picture

However, a survey from software firm Retail Logic out earlier this week suggested that many retailers remain sceptical about the benefits of chip and PIN. More than 20 per cent of retailers quizzed said they had decided to put off the upgrade to Chip and PIN until the next time they replace retail (point of sale) terminals.

A spokeswoman for the Chip and PIN project said the research addresses only medium sized retailers, who account for 15 per cent of all plastic card transactions. According to the Chip and PIN Project, the 45 largest retailers are fully committed to implementing chip and PIN. Businesses with bank-owned terminals account for 30 per cent of all UK transactions. Rollout of these terminals will be completed by early 2005, "The really good news is that 54 per cent of smaller retailers will also be ready," she added.

She continued: "The Chip and PIN Programme has been encouraging mid-tier retailers to plan for the liability shift and we will continue to support them. It is, however, up to each business to assess the business risks of not moving to chip and PIN. From 1 January 2005 whoever decides not to make the investment will be liable for fraud losses committed on chip and PIN cards which could have been prevented with chip and PIN technology."

The UK Chip and PIN Programme is part of wider international efforts to tackle counterfeit, lost and stolen credit and debit card fraud. A similar domestic PIN-based system for debit cards in France has seen an 80 per cent reduction in fraud since its introduction ten years ago. ®

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Related links

Chip and PIN Programme - "the biggest consumer project since decimalisation"