Say goodbye to signing your credit card slip. As the pen makes way for the Pin in a new pilot scheme, beating high street fraud is now a hi-tech challenge.
You can choose the PIN that suits you
Shoppers who pay for their goods by card rather than cash can forget about signing on the dotted line in future. Instead, we will be asked to tap out a Pin number to authenticate the card.
The change is part of a new drive to stamp out credit card fraud, a crime which accounted for losses of almost £½bn in the UK in 2001.
Shops and shoppers in Northampton are already trialling the new system, which, it is claimed, will almost wipe out the card counterfeiters overnight.
The scheme, which will be rolled out across the UK and the rest of the world, is known as Chip and Pin because it relies on the combination of a microchip embedded in the card and a Pin number.
In the more distant future, the technology could be adapted, say those who helped develop it, to use "biometric" testing such as iris and fingerprint scanning.
Its introduction will be welcomed by the likes of politician Ann Widdecombe, who became a high-profile victim of credit card fraud when her Barclaycard was cloned. The culprits went on a 10-day spending spree which culminated in them running up a £2,500 bar bill.
Every year, thousands of card users are shocked to find rogue transactions listed on their monthly statements - the result of card counterfeiting.
Much of this is down to so-called skimming - the copying of details held on a card's black magnetic strip. Counterfeiters simply write the copied information on to a bogus card and go out shopping. The receipts are charged back to the original cardholder.
However, cards with embedded chips are much harder to clone, and the growing number of these helped cut counterfeit losses last year from a 2001 peak. The latest step of adding a Pin number deals with the problem of criminals forging signatures on stolen cards.
Defrauded of thousands of pounds
The French introduced their own Chip and Pin system 10 years ago, and saw card fraud drop by 80%. Australia and New Zealand also use a similar scheme.
"At the time the French didn't have much card usage - only about 20-25,000 places accepted them," says Mike Hendry, Chip and Pin's technical and operations manager. "But they also had relatively much higher fraud than us. So the urgency was greater and it was easier to do something."
But the French security is not tight enough, says Mr Hendry, hence the need for new technology. The system being used in Northampton is based on a new international standard, developed with the world's two biggest credit card companies, Mastercard and Visa, and will be rolled out globally in the coming years.
A chip holds the same personal data as a magnetic stripe - cardholder name, number, expiry date - but can lock it in more effectively, using sophisticated encryption.
Card fraud takes many forms eg: counterfeiting cards, lost and stolen cards, and card-not-present payments
Counterfeiting was down 7% in 2002, but ID theft was up by 41%
But while Chip and Pin tackles counterfeiting, a big growth area for fraudsters is "card-not-present" purchases, such as goods bought on the internet and over the phone.
Fraud in this sector grew by 15% last year, accounting for losses of £110m. Usually card details are taken from discarded receipts or copied down without the cardholder's knowledge. In the future, says Mr Hendry, mobile phones could be fitted with card slots, to verify these sorts of transactions.
So does this new system spell an end to card fraud? Probably not, admit the experts, who are locked in a cat-and-mouse game with criminals.
"Protecting a card transaction is like protecting any other asset. You build your walls based on how high is the highest ladder," says Mr Hendry.
Soon PIN pads will be appearing in most high street shops
But the in-built flexibility of the Chip and Pin system leaves room for improvement. One day biometric information unique to the individual, such as fingerprint details or iris patterns, could be stored in the card.
Other options are for signatures to disappear from the back of cards and be digitised in the memory of the chip instead, and for voice recognition. But such security additions are not cost effective at this stage and the technology is not up to the job.
Further in the future, says Mr Hendry, the credit card might shrink to the size of a thumbnail.
"After all, the chip in a card is all that's important and that's no bigger than a mobile Sim card. So you could have a contactless card, embedded in a keyring, that you just wave in front of a reader. It would be quicker and you would never need to hand it over to someone else."
Add your comments to this story using the form below:
I am one of the chosen few to receive a new chip and pin card from Lloyds bank for the trial in Northampton. So far I have enjoyed the new experience, although it was strange at first not to sign the receipt. It didn't take long to get used to it. I feel really safe and happy that only I can use my card. I can't wait for it to be everywhere.
Sandra P, UK
This sounds exactly like the system that has been in use in Finland for quite a few years now.
David Smith, Finland
In Portugal you need your Pin for nearly all transactions. Only low value ones like tickets, phonecalls, etc don't need anything.
Carla, UK, (formerly Portugal)
Switzerland has been doing the Pin card verification at point of sale for a while - at least since we moved here in October 2001.
Adam Roscoe, Switzerland
Having used the proposed system in Belgium while posted there for several years, it amazes me it has taken so long for it to reach the UK.
Nick Byers, UK
When I was a student in Singapore, this system was already in frequent use there. This technology is certainly long overdue in the UK. And I can get back to using my card.
Jin-Wee Tan, UK
This technology has been out for many years in Sweden and has worked nicely. This should been introduced in here in UK earlier.
I moved to New York (United States) last year where stores have been using this system for quite a while. It seems to work well, the only problem is people behind you being able to see the number you punch in as the keypads are often high up on stalks in front of the till.
This does not sound particularly new or unusual. New Zealand has been using Pin numbers on credit and debit cards for years. Even the smallest of shops have an electronic funds transfer position (EFTpos) terminal. I couldn't believe how archaic the banking system was when I moved to London.
Tsu Egrew, New Zealand/London
It's about time the UK banks started issuing the "chip" cards. Living in France, I still often use my UK bank card which has to be 'swiped' through the machine, then I have to sign. The signature is never, ever checked. I have signed my credit card slips "Mickey Mouse", "Donald Duck", "Fred Bloggs"... whatever happens to be in my mind at the time. I've never once been called up on it. This has often been for goods in excess of £100. My French credit card uses the chip, and I feel significantly more secure using it.
We have had the 'Chipknip' Chip and Pin system in the Netherlands for some time. It is quick, convenient, secure, and means you can frequently use a card to pay for items that you would normally, due to the amount involved, use cash for. You have to remember to "load" your card with cash though.
Gareth Williams, Netherlands
At last! Australia have been using that system since before 1996 (my first visit) -I'm sure they all laugh at the UK's Victorian banking systems.
Nat Hill, UK
Criminals appear to have no problem duplicating so-called 'protected' audio cds or movie dvds. It will be no time at all before software which can decipher the data on chip/Pin cards is freely available in markets and on the internet.
Chris Anderson, UK
At long last!!! This technology has been around for years. The basics of this started in 1983 and Pin could have been taken up by 1990 but the banks and retailers would not pay. So we had to wait for fraud to get big enough - so that we could prevent it!
In 1995 I swapped to a credit card with a laser etched signature and photo on the back, which worked brilliantly, and surely would prevent fraud in all over the counter transactions, but last year the card issuer went back to blank unsigned cards to be more "cost effective".
Will they at the same time be insisting that retailers do not print all your credit card information out on the receipt? Until this ridiculous and unecessary practice is stamped out identity thieves will have a field day.
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