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Small businesses criticise bank chip and PIN programme

27 May 2003  |  5105 views  |  0 Small businesses criticise bank chip and PIN programme

The Federation of Small Businesses has called on the UK banking industry to keep independent traders up-to-speed with the chip and PIN migration timetable and to do more to protect against cardholder-not-present fraud.

UK banks and high street retailers are currently testing a new chip and PIN payment system in Northampton, in which cardholders replace signature authorisation for purchases by punching in a four digit code at the point-of-sale.

The new credit cards will be introduced nationwide by 2005 and businesses that do not have the requsite point-of-sale pinpads will become liable in the event of fraud.

The FSB is concerned that many small firms are still in the dark about the plans.

John Walker, FSB policy chairman says: "Businesses that rent their terminals from a bank should be okay but others could face substantial costs upgrading to the new system. In many cases they know nothing about these plans. We are calling on the banks to do more to promote chip and PIN in the coming months."

Walker is also concerned that whilst chip and PIN will help combat the use of stolen and counterfeit cards it will not tackle cardholder-not-present fraud, where the sale takes place over the Internet or telephone.

He says: "Cardholder-not-present crime is a big growth area for fraudsters and shot up by 15% last year. There is a real danger that as chip and PIN takes off, fraudsters will just use the Internet and telephone instead. Chip and PIN cards are a great leap forward but the banks need to do much more to combat cardholder not present fraud."

Credit card fraud accounted for losses of £424m in 2001 of which £110m was the result of cardholder-not-present fraud.
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