Safeway first UK store to introduce chip and PIN technology
safer method than the usual signature - are to be introduced in the
UK by 2005, but supermarket group Safeway is to begin its scheme
later this year.
Britain's food retailers are among the foremost in Europe, and lead their Continental counterparts in many areas of business. But one area where stores in the UK - food retailers and others - have lagged behind their European rivals is that of secure card payments.
But this is all about to change, with the announcement by the UK's fourth largest supermarket change Safeway that it is going to introduce a new payment system in 500 stores by the end of the year. The system, widespread in countries such as France for the last decade, requires customers to key in their personal identification number (PIN) when paying by card, rather than the more traditional UK method of signing a payment slip.
It seems unbelievable that it has taken this long for the UK to introduce the PIN system, given that British consumers are much more card-friendly than their counterparts across the Channel and that the signature system is wide open to fraud.
The delay has been caused primarily by disagreements between Britain's banks and retailers over who was going to shoulder the cost of transferring to the new system, and while retailers still remain to be convinced that the cost of introducing the system outweighs the money lost to fraudulent transactions each year, there is a general consensus that the system will be introduced in the UK as a whole in 2005.
UK shoppers are already seeing their traditional magnetic strip cards replaced with new cards with the special chip necessary for the new system.
The British Retail Consortium said that it was not in a position to publicly support the chip and PIN system because UK competition law prevented it from doing so while retailers were in the process of negotiating with their banks over compensation for the cost of the scheme.
However, it has issued a policy statement saying that it supported a trial of the system planned for spring of next year which would be "a necessary step in testing technical and operational standards" and provide "a full understanding of operational impacts and relevant costs leading to subsequent successful implementation of this technology".
It is understood that this trial is independent of Safeway's individual decision to introduce the new chip and PIN system. Supermarket chains which have agreed to take part in next year's trial include Spar, Sainsbury, Tesco, Marks & Spencer and Morrisons.
APACS, the Association for Payment Clearing Systems, said that the number of payments by plastic cards (both credit and debit) in the UK had risen from 930 million in 1990 to nearly 4 billion in 2000, and that as a result the incidence of fraud using lost or stolen cards had also increased.
It said that chip cards were a much safer method of payment, as they are built to an internationally-agreed standard, with many countries around the world already implementing the systems. Chip technology uses highly sophisticated processing to identify genuine cards and make counterfeiting extremely difficult and hugely expensive, it said.
"Over the next two to three years all 100 million debit and credit cards in the UK will be reissued with embedded microchips, with the aim of drastically reducing card fraud losses. These microchips will be programmed with the capability of identifying cardholders using a PIN. Chip cards have the ability to support 'add on' services such as retailer loyalty schemes or electronic purse and also provide opportunities for secure new services in the fields of electronic commerce and home banking," it said in a statement.
The total costs of implementing the PIN programme are estimated to total some £1.1 billion (€1.7bn).
