Anti-fraud chip and pin trial poised for launch

The long-awaited trial of chip and pin, the UK banking industry’s multibillion-pound anti-fraud initiative, is to begin next...

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

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