£1.1bn fraud-busting bank card scheme goes nationwide

The national rollout of new 'smart' bank cards as part of a £1.1bn scheme to cut the UK's £424m annual fraud bill by over half is to begin this week.

The 'Chip and Pin' project, which is backed by payment clearing body APACS, banks and the British Retail Consortium aims to issue 42 million people with 120m of the new cards by 2005.

Sandra Quinn, spokeswoman for APACS, said: "The first chip and Pin cards will start hitting doormats this week. This is a massive project. It is a major change to the way we make payments. It is the biggest collaboration project between banks and retailers since decimalisation."

More than 120,000 people in Northampton have already taken part in a trial earlier this year using the cards, which have a secure chip instead of a magnetic strip that allows transactions at tills to be verified by tapping in a four-digit Pin number instead of signing a receipt. No figures are currently available as to how much the trial cut the town's £1.5m annual card fraud bill.

The UK is the first country in the world to adopt the EuroPay Mastercard Visa (EMV) card standard, and one in five cardholders are expected to have the new cards by Christmas this year. A target of 90 per cent rollout has been set for the end of 2004.

The rollout is not being done on a regional basis and cards will be issued nationwide in line with the individual timetables of each of the banks and card companies.

France adopted its own Pin-based system ten years ago, which cut domestic card fraud but because it was not based on any international standard French cardholders still suffered fraud abroad. Sandra Quinn said France is in the process of ripping out that system and will also be adopting the EMV standard. However, the US has still to make any decision.

As part of the project 850,000 retailer terminals, 120m cards and 40,000 cash machines will all be upgraded to the new technology.

Supermarket group Safeway is one of the first retailers to commit to early use across its stores nationwide and its store at St Katharine's Dock near Tower Bridge in London is the first outside of Northampton to be equipped.

Amanda Miller, director of retail services at the BRC, told silicon.com that it will be an expensive and major IT project for the large chain stores but warned that those retailers who do not adopt the new technology will be liable after 2005 for fraud committed using the old card system.

"For the larger retailers it depends where they are in their cycle of replacing technology. For some it has come at an opportune time as they were going to do a refit anyway. With the major high street names they have looked at what the cost of fraud would be and the cost of investing and recognised this is an investment they have to make," she said.