The £1.1bn chip and Pin anti-fraud initiative took centre stage at last week's annual Retail Solutions conference in Birmingham, which played host to some 5,000 of the industry's key decision-makers over three days.
The chip and Pin initiative aims to cut credit and debit card fraud by 50% by requiring cardholders to authenticate purchases with a personal identification number rather than a signature. The technology has been on trial at stores in Northampton since mid May.
Implementing chip and Pin-compliant systems is the number one priority for retail IT directors at the moment, and the trial will be key to ensuring that the massive investment required - estimated to be £1.1bn across the sector - is not squandered.
Matt Hunt, implementation director at the Project Management Organisation, an independent body set up by the British Retail Consortium and payments association Apacs to oversee the chip and Pin programme, spoke to delegates at Retail Solutions about the progress of the trial.
About 125,000 chip cards have now been issued to Northampton residents, with 500 stores accepting Pin payments. By the end of the trial, a total of 200,000 cards will be in circulation, with 1,000 retailers accepting the new method of payment. Hunt said all the signs from retailers and consumers so far have been positive.
"The key aim of the trial is to educate users and gauge their reaction - the technology had already been thoroughly tested by retailers and their suppliers before the trial went live," he said. "We have been pleasantly surprised by the feedback we have received so far. For many people, Pins are a way of life, so we thought they would be ambivalent, but the enthusiasm has been surprising."
Hart highlighted some quotes from Northampton consumers reflecting this positive response. "It is easy enough to forge someone's signature but you never know their Pin, so for card fraud I think it is a good idea," said one.
"I have used it twice at Safeway since I had it and found it really easy to use," said another. "No problems at all and a lot safer."
Retail managers in Northampton and card issuers have also been encouraged by the reaction of their customers.
Graham Pye, store manager at Safeway in Kettering Road, said, "Our customers seem to be quite comfortable with entering a Pin instead of signing their names and people are certainly keen that it foils the fraudsters."
David Cooper, head of risk for Lloyds TSB credit cards, said, "We have had excellent feedback from those customers who have been involved in our trial activities in Northampton. We are confident that, armed with feedback from the trial, we will be able to commence a successful roll-out later in the year."
Hunt said the feedback from customers is already leading to subtle changes in the chip and Pin systems and processes operated by retailers. "The general expectation was that staff would put the card into the reader, meaning all the customer had to do was enter their Pin," he said. "However, feedback from Safeway and others has told us that consumers are keen to stay in control of the whole process - words like 'empowerment' have been mentioned."
Consumer feedback is also helping retailers overcome some of the inevitable teething problems with the technology.
"Some customers felt the Pin pads were not private enough, requesting a visor around the number keys, and one supplier has already added this capability to its offering," said Hunt. "There have also been some issues with the positioning of the keypads, which has been altered by some retailers. However, these are exactly the sort of issues that we hoped the trial would raise, giving retailers the information that will allow them to provide the best service possible."
The Project Management Organisation said it is confident that the positive reaction of the Northampton public will be replicated across the UK when the national roll-out begins in the autumn.
When the body surveyed 1,300 people across the UK in May about their attitudes to authenticating payment by Pin, more than 73% said they thought chip and Pin was a good idea, and 70% said they believed Pins were more secure than signatures.
"We are already benefiting from initial feedback from the trial and we will be conducting several more surveys during the trial to get more feedback," Hunt said. "We will be regularly publishing 'lessons learned' on our website."
Time is running out
Hunt warned that retailers who have not started planning for chip and Pin should do so immediately because time is fast running out.
Although 1 January 2005 - when retailers without chip and Pin-compliant systems will be liable for all fraudulent card purchases - is still 18 months away, the switchover takes time, he said.
"Experience has shown us that it can take up to 12 months to switch over to chip and Pin, with issues such as testing, certification and training taking time. Although there is still 18 months to go, retailers have to take into account Christmas and Easter trading, when any system work is usually put to the side."
Although some retailers still need to play catch up on their chip and Pin projects, the overall trend, as seen at the Retail Solutions conference, is encouraging, Hunt said.
"There has been an encouraging number of mentions of chip and Pin around the exhibition. Last year, we were the only people talking about it, but the message seems to be getting across. Retailers are realising there is a business case for this and that there are benefits to be had."
For more information go to www.chipandpin.co.uk
Chip and Pin trial: facts and figures
- 125,000 chip cards issued
- 500 shops "switched on"
- 7,500 transactions made
- Retail sectors covered: foodservice, men's and women's clothing, electronics, leisure, grocery, opticians, motoring.
Still to come
- Total number of cards issued to rise to 200,000
- 1,000 shops "switched on"
- Additional retail sectors to be covered: forecourts, hospitality, pharmacy
- Lessons learned from the trial will be published by the end of August.
What IT chiefs should be doing
The Project Management Organisation recommends the following timetable for retailers with integrated Epos systems:
- Prepare the business case now
- Talk to the company's bank about the necessary IT links immediately
- Make sure you understand the operational issues
- Put a project schedule in place, including choosing an IT supplier
- Agree the timetable for testing and certification - do not leave it late or you will be stuck in a queue
- Train your staff
- Prepare your customers.