Handheld credit card readers to cut fraud

A new payments system aimed at reducing 'card not present' fraud is to be trialled by UK payments association Apacs.

Apacs has developed the system, which uses a handheld card reader, from the global standard created by card companies MasterCard and Visa. It is designed for online and telephone transactions which are potentially vulnerable to fraud because they can be carried out with card details only - and do not require a PIN or signature.

To make a purchase with the system, customers first insert their card into a small handheld reader and enter their pin number. This generates an eight digit number - valid for one transaction - which customers enter online or give to a phone operator to secure the payment.

An Apacs spokesman said the organisation was working towards a trial later in the year and discussions about which banks will be taking part are ongoing.

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He said: "[The card reader system] will definitely help in the battle against card not present fraud."

Several UK banks have already trialled the technology. A Barclaycard spokesman said: "Barclaycard has tested [the system] and we were encouraged by the initial results and we're in a period of further testing."

He added the system will also be rolled out to select customers later in the year.

Lloyds-TSB has been testing a number-generating key fob to make transactions more secure but is also looking at the card reader system.

A Lloyds-TSB spokesman said: "We'll be moving in that direction."