It's safety in numbers as anti-fraud cards arrive

The anti-fraud 'chip and pin' credit and debit cards are beginning to arrive on people's door-mats - but there could still be a wait before customers get to use them.

After a successful pilot phase in Northampton last year, these improved-security cards are now being delivered in large numbers to customers across the country, as the payment industry puts into practice its biggest ever bid to reduce card fraud.

In a project described as the most ambitious financial changeover since decimalisation, every credit and debit card is being replaced by a new chip and pin version. These cards will no longer be used with a signature, but instead will be verified using a four-digit pin number.

The other major security feature, the "chip", refers to a microchip embedded in the card, which will make it much more difficult for cards to be copied and cloned by fraudsters. But if you have received one of the 8m chip and pin cards issued so far, then the first thing you will want to do is to take it for a test-drive and see how it works.

At least, that was my reaction when I got my first chip and pin card. But I have to report that it's still a case of wait and see, because almost none of the big retailers have switched over to the new system.

Safeway is the only major chain to have converted all its shops. Elsewhere on the high street, most of the big names are not set to change until some time later in the year. And there has been speculation that it could be well into 2005 before some chain stores make the switch.

So if you're expecting some French-style swiping with your new card this weekend, you might be disappointed. And hopefully we won't have lost or forgotten our credit card pin numbers by the time we get to use them.

If you want to find examples of shops adopting the new chip and pin card keypads, then you could have more success with smaller shops. These non-chain companies, such as clothes shops or hairdressers, have had their card reading equipment changed for them by the banks.

But as the chief pioneers of this new way of paying, Safeway says that the reaction from consumers has so far been positive and that the fears about customers not liking the pin system have proved unfounded.

"Everyone knows someone who's been a victim of card fraud - and we've had lots of good feedback about moving to the new system. There were worries about elderly customers forgetting their numbers, but that hasn't proved to be the case - and people seem to be getting through the tills more quickly," said Safeway. A spokesperson for the 'chip and pin' switchover says the project is still on track, and that the target has always been for a majority of card transactions to be using chip and pin by the end of this year, rather than for the implementation to be completed.

And to push the message of the imminent arrival of chip and pin cards, there is currently a promotional roadshow touring shopping centres across the country giving consumers advice about their new type of card.

But even if a substantial amount of the the changeover is still in progress next year, it is going to happen - and there have been forecasts that the new style of cards will begin to change how we use cash and plastic.

Payment company, Visa, is anticipating that the chip and pin cards will mean we're more likely to use plastic, rather than cash, to make smaller purchases.

The theory is that the speed and informality of tapping in the code number, rather than signing a receipt, will make card purchases seem more convenient, even for a pint of milk and a newspaper. And the improved security of the new cards will make us more confident about using plastic in a wider range of settings.

Visa also suggests that the more secure pin number system will allow for more "unattended payment terminals", such as for petrol or parking. And for an increasing number of services we could be sticking in our card and tapping in a pin number, rather than paying at the till.

Visa's survey claims that in the past five years we've already become accustomed to using cards more often, with 70 per cent of people carrying less cash than before. In particular, women are carrying less cash, with safety fears being a prime reason.

But even though pin numbers are an improvement on the vulnerabilities of the signature system, it will not mean the end of card fraud. While it's often pointed out that the use of pin numbers cut card fraud by 80 per cent in France, it is sobering to look at another overseas example, the United States.

Last year's US national fraud figures from the Federal Trade Commission showed that a remarkably high 42% of all fraud cases involved identity theft - with the largest single group being new credit card accounts being opened using a stolen identity. Such a crime would not be directly prevented by the chip and pin measures.

So even when we get to use our new cards, the battle against fraud is going to be a long one.