Mid-sized
retailers have been warned to begin implementing chip and Pin
compliant electronic point-of-sale systems or risk joining a new
“retail underclass”.
The warning, from
analyst firm Butler Group, came as the first chip and Pin
“barometer” report of 2004 revealed that 100,000 UK businesses are
accepting Pin authentication on card payments and that one in six
cardholders has a new chip card.
Chip and Pin, the
£1.1bn initiative which aims to cut card fraud by 60%, is due to be
rolled out nationwide by the end of 2004. From 1 January 2005, any
retailer without chip and Pin-compliant point of sale systems will
be liable for the cost of fraudulent card transactions, instead of
the banks.
The top 25
retailers, which can afford system upgrades and stand to lose the
most from the liability change, and the smallest retailers, which
rent their point-of-sale terminals direct from the banks, are all
expected to meet the deadline.
However, many of
the UK's 10,000 tier-two retailers feel they cannot afford or
justify the replacement of existing systems ahead of their planned
schedule.
This leaves every
transaction exposed to risk, warned Andy Kellett, senior research
analyst at Butler Group, in the group’s OpinionWire report.
“Because the high
profile suppliers and the small targets at the bottom of the market
have been removed from the easy reach of the common fraudster,
there will be a natural gravitation to pushing fraudulent
transactions towards those that continue to run older, exposed
systems,” he said.
“Chip and Pin
deployment is likely to bring with it a new retail underclass – for
the sake of your organisation’s future wealth and sustainability,
this is a group you should not consider joining.”
However, retailers
face a race to meet the deadline as there are supply chain problems
for both chip and Pin enabled terminals and standard point-of-sale
systems, warned Lehane Kellett, head of technical consulting at
retail IT consultancy PMC
“Retailers are
hoping the price is going to go down and that supply problems are
going to go away – this is not going to happen,” he said.
The Chip and Pin
Programme Management Organisation, set up by the British Retail
Consortium and UK payments body Apacs to oversee the rollout of the
technology, has been criticised for ignoring tier-two
retailers.
However, Sandra
Quinn, director of corporate communication for Apacs, said, “We
have engaged with as many (tier-two retailers) as possible, giving
them the information they need to put the business case together.
The ones we are concerned about are those that have not even talked
about it.”