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The objective of Chip and PIN is to substantially reduce
credit card fraud, which reached £402.4 million in 2003 and was projected to grow to £1 billion quickly if it was not brought under control.
With a Chip & PIN credit card, instead of signing a
receipt when you pay for goods at a checkout, you'll enter a
four digit PIN (Personal Identification Number) into the card
terminal in order to authorise the transaction. An additional
security feature is the microchip imbedded into the card which
makes it far more difficult for a fraudster to copy.
It is hoped that the amount of fraud due to card ‘skimming’, where a fraudster produces a replica of a card
after swiping it through a small reader, will be substantially
reduced.
The majority of cardholders will have a chip and PIN card by
the end of 2004.
Key Facts
- Key retailers (such as Tesco, Homebase and PC World) have begun
to install or have completed rollout of chip and PIN across their
shops.
- Three in five cardholders have a chip and PIN card.
- 47.9 million chip and PIN cards have been issued (end August
2004).
- Major retailers now rolling out chip and PIN account for some
39% of all card transactions.
- A similar PIN-based system for debit cards in France has seen an
80 per cent reduction in fraud since its introduction ten years
ago.
Change Payment Behaviour
Experts think that the increased security and ease of use will encourage more people to use
credit cards for payment, heralding the end for cash and cheques.
Mastercard believes that the increased security will cause a 37% jump in the use of debit cards with cash and cheques losing popularity. It also predicts that another three million people who don't have credit cards will start to use them.
However, The Association of Payment Clearing Services (APACS)
believes that while the use of plastic is going to increase, it doesn't expect cash to disappear completely for a long time because at the moment none of the cards can be used to buy small-change items such as a pint of milk or a newspaper. Although
e-cash or smart card, such as Visa Cash and Mondex, have been around for a while, it hasn't
really caught on. E-cash systems have mainly been
successful in localised situations such as on university
campuses or on bus routes.
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