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The UK "chip and Pin" initiative, which banks and retailers have been discussing for 18 months, is designed to reduce credit and debit card fraud, which last year rose by 30% to £411m.
Under the initiative, based on smartcard technology from Europay Mastercard and Visa, a chip will store the cardholder's details and transactions will be authenticated by Pin not a signature.
Bank payment body Apacs, which co-ordinates the banking industry's fight against card fraud, said the initiative should more than halve predicted card fraud losses.
However, some UK retailers have threatened to boycott the initiative because they feel the cost of new systems, estimated at £1bn, will outweigh potential benefits.
The British Retail Consortium said it supported the Northampton trial but added, "Many issues remain to be resolved, not least to ensure that the massive level of investment to be made by retailers to introduce the technology can be justified alongside other customer service improvements."
The trial - which Apacs said is about education rather than technology - will begin in early 2003 with a country-wide launch in 2005.
Visa scheme cuts e-tailer's liability
Online retailers that sign up to a new e-payment authentication service from Visa will no longer be liable for the majority of disputed e-commerce payments. The liability will shift to the issuing bank, the financial services giant said last week.
The Verified by Visa service, launched in Europe this week, could save UK retailers up to £55m a year by reducing the number of cardholder-disputed transactions by 80%. The service will also eliminate the associated handling costs that disputes bring by introducing a password element, the company said.