Medium-sized retailers must begin to implement chip and
Pin-compliant electronic point of sale systems or risk falling into
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 already accept Pin authentication on card payments and
that one in six cardholders has a chipped card.
Chip and Pin, the £1.1bn initiative, which aims to cut card fraud
by 60%, is due to be implemented nationwide by the end of 2004.
From 1 January 2005 liability for the cost of fraudulent
transactions will pass from the card issuer to retailers if they
are not equipped with chip and Pin payment systems.
The top 25 retailers, which can afford system upgrades and stand to
lose the most from the liability change, and the smallest, which
rent point of sale terminals from banks, are all expected to meet
the deadline.
However, many of the 10,000 second tier retailers in the UK feel
they cannot afford or justify the cost of replacing systems earlier
than they had planned. This leaves every transaction exposed to
risk, warned Andy Kellett, senior research analyst at Butler
Group.
"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, there are supply problems for both chip and Pin-enabled
terminals and standard point of sale systems, according to 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 will go away. This is not going to happen," he said.