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This story was printed from silicon.com, located at http://www.silicon.com/

Story URL: http://www.silicon.com/financialservices/0,3800010322,39161398,00.htm

Is chip and PIN really a success?
Six months in, time to break out the champagne?

By Dan Ilett

Published: Tuesday 15 August 2006

Back on Valentine's Day this year, romance was not the only thing on the minds of retailers and bankers.

Because that day six months ago was also the deadline for the introduction of chip and PIN terminals in retailers across the country.

Banks are today claiming that the chip and PIN story has been a success. They say while more than 150 chip and PIN transactions are processed every second counterfeit card fraud in 2005 was cut by nearly £60m - a drop of 24 per cent compared to 2004.

The figures from banking industry group Apacs show that UK banks have issued 130 million chip and PIN cards - a figure that equates to 92 per cent of 141 million cards.

Apacs said that as a result of the switchover, shoppers are safer and that fraudsters have been denied millions of pounds of stolen money.

"Of course it hasn't eradicated fraud - it never could. But it is a fact that chip and PIN has made our cards safer than they were two years ago," the industry group said.

But while high street fraud may have fallen, criminals have shifted their attention to the internet and other areas.

According to figures from Apacs, online banking fraud is a growing problem. Losses from this type of fraud doubled in 2005, hitting £23.2m, due to the rise in email phishing scams. And last year internet, phone and mail-order transactions - and card-not-present fraud - rose by 21 per cent to £183.2m.

So now that one avenue for fraud has been closed down, bank are now having to take a closer look at how they protect their customers' money in other areas.

But chip and PIN has not gone without hiccups either. In May, petrol company Shell was hit by an alleged chip and PIN scam which resulting in the company suspending the use of chip and PIN payments at 600 UK petrol stations as a precautionary measure.

And while many are now becoming used to bashing their PIN code in when they do their shopping, but some argue there are better ways of cutting fraud.

Chris Skinner, CEO of financial services think tank Balatro told silicon.com: "I'm an anti-chip and PIN person. Sorry Apacs - I like them very much but it's not an appropriate technology today. Chip and Pin is very old in a very modern society - it started in France in 1994.

"In Eastern Europe [Hungary and Russia] they have a much better system than chip and PIN - when you make a payment you get a text. You can ignore it or if there's a problem, you get in touch with your bank. It's very cheap but there's been a 93 per cent reduction in fraud - that's far more successful than chip and PIN."