Business Crime
Trial of Chip and Pin Credit Cards
The largest ever trial of fraud busting card technology by UK banks, retailers and customers has been declared a success, but a 2005 national implementation deadline presents organisations with planning considerations.
Chip and PIN replaces signing a paper receipt at the till, the new method using a four-digit Personal Identification Number (PIN) in the same procedure as an ATM. Three months were spent testing the chip and pin credit and debit cards in Northampton. The cards use a secure chip that replaces the magnetic strip.
Card Fraud
By January 2005, PIN rather than signature will verify the majority of all face-to face plastic transaction made in the UK. The chips on the cards meet new global specifications known as EMV (Europay, Mastercard, and Visa). This initiative is to prevent card fraud in one of the fastest growing crimes in the UK. A record £424.6million was made in UK card fraud in 2002, in comparison to £122million in 1997.
The £1.1bn 'Chip and Pin' cards scheme is aimed at slashing the UK's annual card fraud bill by 60%. By 2005:
850,000 retailer terminals will be in use
122m cards will be in circulation
40,000 cash machines will be compatible.
Much of the money obtained from card fraud is used to fund other crime such as drug trafficking, illegal immigration and terrorism. Other crimes like burglaries, muggings and car break-ins are often motivated by opportunity to steal payment cards. To combat card fraud, two things need to be established at the time of the transaction:
the card is the genuine item
the person using it is the true owner.
This scale of change in the payment behaviour of 42 million cardholders, and 1.5 million retail staff, needs a strategic plan to ensure success. Many other countries around the world are planning to implement the chip and PIN system, which is being built to an international standard. A similar domestic PIN based system in France has seen an 80% fall in fraud since it came in ten years ago.
Chip and PIN trial
The trial of the chip and PIN system started in Northampton in May 2003 as an initial step toward national rollout. It involved re-issuing a significant number of Northampton cardholders with new chip and PIN cards, and upgrading point-of-sale terminals at a selection of retail outlets.
Why Northampton?
181,000 chip and pin cards were circulated in Northampton, for usage in the functioning 600 shops. Northampton was chosen because:
it has a high proportion of people who live and shop in the same area
it has a sufficient scale for a meaningful trial, and has a good representation of leading high street retailers.
the town contains a wide selection of banks that took part
its environment is where residents will shop locally, maximising PIN transactions
it enables an assessment of PIN usage across a range of demographic segments.
Consumers
Consumers for the trial responded well to the new cards, with administration times and queuing decreasing; although there were concerns for other shopper surveillance whilst tapping in their PIN number.
Retailers
The trial has indicated that retailers, especially large chain stores, will have initial problems and should allow plenty of time (30 weeks recommended) to test and implement new point of sale terminals and staff training.
Retailers, banks, and credit card companies that participated included:
Asda
Mcdonalds
Marks and Spencer
Tesco
Abbey National
Barclays
Egg
HSBC
Lloyd's TSB
Mastercard
Switch
Visa
Suppliers
Suppliers of the technology will need time to certificate and approve each piece of the software. A last minute rush by firms will produce a bottleneck of orders that cannot be met.
Last update: 12/09/03