The long-awaited trial of chip and pin, the UK banking
industry’s multibillion-pound anti-fraud initiative, is to begin
next month after final specifications were confirmed today (11
April).Chip and pin requires cardholders to authenticate purchases with
a personal identification number rather than a signature. It will
go on trial in Northampton before a nationwide rollout by the start
of 2005.
During the trial, Northampton consumers will be prompted to use
their pin for one in every two or three transactions using a range
of debit and credit cards.
American Express, Barclaycard, Barclays Bank, the Co-operative
Bank, Egg, Girobank Merchant Services, HSBC, Lloyds TSB,
MasterCard, The Royal Bank of Scotland Group, Switch and Visa are
all participating in the trial.
Around 1,000 retailers, from large and small shops to petrol
stations, pubs, hotels and restaurants, are expected to
participate. Large retailers already committed to the trial include
All Sports, Asda, the Co-operative Group, JD Sports, Marks &
Spencer, McDonald's, Morrisons, Next, Safeway, Tesco, Total, WH
Smith and Woolworths.
Retail and banking industry figures said chip and pin will be
key to addressing card fraud, which reached a record £424.6m in
2002. The aim is to cut card fraud by half.
“More than £1m worth of card fraud is committed every day - that
is a fraudulent transaction every eight seconds,” said Chris
Pearson, chief executive of the Association for Payment Clearing
Services. “We are putting in measures which will have a significant
impact on this figure, will ensure better safety for UK consumers
and will help take away the nightmare of card fraud.”
Chip and pin has the potential to combat card fraud, but it is
important that the business community works together on crime
reduction, said Bill Moyes, director general of the British Retail
Consortium.
“Retailers are working closely with the banking industry to
ensure that implementation is smooth and customers understand what
these changes mean for them.”
Educating cardholders rather than testing technology,will be the
most important aspect of the trial, said Colin Grannell, managing
director of the UK arm of credit card giant Visa.
"Key to the success of the pilot will be ensuring cardholders
receive the right communications and guidance about the changes
they need to make," he said. "We know the technology works and the
pilot will ensure the transition is as seamless as possible for our
72.5 million cardholders.
The UK chip and pin programme will see more than 850,000
retailer terminals, 122 million cards and 40,000 cash machines
upgraded by the end of 2004. The chips on credit and debit cards
will meet new global specifications known as EMV
(Europay/MasterCard and Visa).
A similar domestic pin-based system in France has reduced card
fraud by 80% since its introduction 10 years ago. Most European
countries, including France, are expected to implement the EMV
system over the next five years