What's on the cards with Chip and Pin

Chip and pin cards are already rolling out and in the next year, everyone in Britain with a debit or credit card will need to understand the new system that is replacing our current signature-based system. The main aim is to tackle card fraud, largely the preserve of organised gangs which, say police, often use the proceeds to fund drug- and people-trafficking and even terrorism.

Mastercard and Visa - the operators of the card infrastructure - are trying to explain how ordinary people are affected and Visa has just begun a series of roadshows. Cash looks at the basics.

What is Chip and Pin?


A £1 billion initiative by the banking and retail industries to tackle mounting card theft and fraud, which they estimate will cost them £800 million next year if they do not tackle it. Instead of your (easily forged) signature triggering payment by the card, you will be given a four-digit Pin number that you will be asked to enter each time you buy something. All debit and credit cards will work this way. Your Pin will be encrypted into the chip and it will not work if the wrong number is keyed in. (It is encrypted into your card's chip in such a complicated way that it should not be worth the time of any fraudster to try to work it out.)

One of the main effects for you is that you will now need to remember a Pin number for your credit card (a number you probably do not use now unless you make cash withdrawals on it).

When is it being introduced?


By the middle of 2005, just about every debit and credit card (122 million of them), all cash machines and shop tills will be converted.

How does it benefit me?


It will make it less likely that people will try to steal your cards or copy them. Chip and Pin was introduced in 1993 in France, and Visa says it 'has effectively stamped out domestic card fraud from lost or stolen cards'.

You should also spend less time waiting at check-outs in supermarkets, says Colin Grannell, chief executive of Visa: 'Transaction times should definitely get quicker, and that should lead to shorter queues.' Since signatures will not need to be verified by a human being, there will be a growth in self-service check-outs (extremely easy to use when you have done it once).

Are there any disadvantages?


Fraudsters will look for different scams; in France they shifted some of their focus to tourists without Chip and Pin cards.

What exactly do I do?


Unless you have already received one, you are likely to get new debit and credit cards in the next 12 months, each one linked to a different Pin number which will be sent to you separately. You can change the Pin number at a cash machine to one you can more easily remember.

When you come to use the card, withdrawals from cash machines will be done in the same way. For purchases in shops, restaurants and other locations, however, you will be asked to input your number rather than signing.

How does this work for internet or telephone purchases?


You will not be asked to disclose your Pin number in either of these circumstances as it would be all too easy for fraudsters to get them in this way.

The banking sector is looking at setting up Pin-inputting machines for home use (with the user-friendly name of 'token-based authentication') that would generate a one-off security code for the transaction when you entered your number. In the interim, retailers are being encouraged to use back-up verification as well, such as asking for your address or the security number on the back of the card.

What happens if I forget my Pin?


Moat House Hotels is typical of many organisations in saying: 'For a period, we plan to let customers sign or use their Pin.' This is expected to happen quite often, especially with credit cards when people may not be used to remembering a Pin number. But the basic rule is that you get three chances to enter your number and will not be able to use the card if you get it wrong each time. You must then ask your provider to send you a new number.

What happens if I go abroad?


You will use Chip and Pin in most of the rest of Europe in the same way as in Britain. In some countries, such as the US, you will still sign as they have not made the decision to switch technologies.

Can I disclose my Pin to anyone else?


Never. Not even your bank asks for it. If anyone else asks for it, do not tell them - and report the request to your bank.

Does the new system mean I have to be even more careful with my Pin?


In effect, yes. The whole system falls apart if other people know or can guess your Pin number. If you think someone else may have watched you entering the number, you are asked to tell your bank immediately. There is an art to picking numbers that are memorable to you but no one else - an old telephone number, for example.

What happens if a fraudster takes my card?


Report it immediately. The maximum you can be held liable for is £50 (which is usually waived by the banks) if your negligence did not contribute to the fraud. This is another reason why you should not tell anyone your Pin number. Your card issuer should be able to provide you with a new card and number quickly.

www.chipandpin.co.uk