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Chip and Pin up the stakes in fighting fraud

Payment cards get clever

In a bid to tackle the growing problem of UK credit and debit card fraud, security company Chip and Pin will be trialling new secure cards from May, with the aim of a nationwide rollout by 2005.

The trial, to take place in Northampton, will see all existing plastic cards replaced with those containing chips instead of magnetic strips and a four-digit pin number replacing signatures.

"More than £1 million worth of card fraud is committed every day — that's a fraudulent transaction every eight seconds. Chip and Pin will wipe the smile off the faces of the UK's fraudsters," says Chris Pearson, chief executive of Apacs (Association for Payment Clearing Services).

Unlike magnetic strips that can be easily copied with so-called card readers, chips are much harder to counterfeit. Likewise, guessing a pin number will prove much more difficult than forging a signature.

In 2002 £464.6m worth of fraudulent transactions were committed compared to £411.5m in 2001. Counterfeit card fraud counts for the majority, around £149m last year alone.

Debit card company Switch, which accounts for around 1.5bn transaction a year, is in full support of the scheme.

"While we've had a series of initiatives over the years, including online authorisation direct to the card holder's bank account and 'hot card files' for lost and stolen cards, this is the boldest move yet to stop the fraudster in his tracks," says Roger Alexander, chief executive at Switch.

"Switch and our member banks will be co-operating fully with Chip and Pin's trial in Northampton," he added.

Banks taking part in the pilot include Lloyds TSB, Barclays, Egg and HSBC.

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