Chip and PIN backfires as cards go astray in the post

Chip and PIN backfires as cards go astray in the post

The national roll out of chip and PIN technology in the UK is having unexpected consequences for fraud levels, as thousands of new chip cards and PINs issued by banks are being intercepted in the postal system.

The UK's banks are posting out millions of EMV chip cards and PINs to replace magnetic swipe cards ahead of the 1 January 2005 deadline for the switch to the new payments system.

According to a report by The Guardian newspaper, with so many cards being sent out, the number that is being intercepted by thieves has soared, leading to rising fraud levels.

The majority of cards are sent out using a standard postal service, and the problem is exacerbated by the fact that most customers are not expecting a replacement card. To make mattters worse, says the Guardian, some banks are sending out "active" cards that can be instantly used alongside magnetic swipe cards.

A spokeswoman for the Association for Payment Clearing Services (Apacs) admitted that more cards are going missing.

"There is a feeling that there is a concerted effort among criminals to get more money out of the system ahead of chip and pin's introduction," she told the newspaper. "When all shoppers are tapping in a pin number rather than signing for goods, it will make life harder for thieves."

As a consequence, mail non-receipt fraud is expected to rise even more than the 17% it rose last year, when losses hit £43.4m.

The chip and PIN system is being rolled out across the country to lower card fraud levels. Apacs says trials of the system conducted in Northampton last year have been successful, with half of cardholders using the system for most of their purchases.

But recent research by Detica found that 60% of UK cardholders still know little or nothing about chip and PIN and more than one-in-four consumers would be unhappy entering their PIN at a public point-of-sale terminal. Furthermore, research by Retail Logic suggests that a quarter of the UK's retailers are unconvinced by the new payments system, with over half (53%) admitting they would not be ready for the system before the January deadline.

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