Retailers may need to double the capacity of connections transporting transactions, if shoppers are not to be kept waiting longer for payments to be authorised at tills with the introduction of Chip & PIN.
The advice comes from one of the UK’s leading data communications services companies, Transaction Network Services, (TNS), in a series of workshops with banks, retailers and terminal manufacturers.
According to TNS, the time taken to authorise payments may increase, unless merchants upgrade capacity to transport larger messages between point-of-sale terminals and banks.
From 1st January 2005, retailers become responsible for fraud carried out on cards, where they are not able to process transactions using Chip & PIN. The move follows a decision by the Association of Payment Clearing Services (APACS) to switch to PIN as the means of verifying the identity of the card-user. It aims to cut losses to card-fraud calculated at £1 million per day in the UK by 60 per cent.
Government, banks and retailers are working to introduce 120 million smartcards and 750,000 new point-of-sale terminals and to persuade 42 million people to learn and use their PIN numbers.
Migration from traditional magnetic stripe to Chip & PIN cards will potentially double the size of messages that must be transmitted from retail terminals to acquiring banks from around 148 bytes to over 300 bytes. Without any increase in capacity, the time taken for payments to be authorised could slow down by up to five seconds per transaction.
A retailer with a leased line operating at 50 per cent utilisation for magnetic stripe will need to double bandwidth or install an extra leased-line connection to support Chip & PIN transactions. With most retailers' leased lines already operating at 70 per cent, the effects are likely to be especially apparent at peak times such as weekends, Christmas and Bank Holidays.
Alan Stephenson-Brown, Sales Director, Transaction Network Services commented: "In the race to meet the 1st January deadline, attention has focused on customers and terminals. By concentrating on installing and accrediting card-readers, the need for extra capacity to support the introduction of Chip & PIN is being overlooked."
"There is a real and hidden risk of delays at check-outs - especially at peak times. If merchants do not review connectivity, they could jeopardise the goodwill of customers – and staff – at checkouts and incur significant additional cost."
The need for additional network capacity is expected to come to a head after 1st January 2005, with the phased introduction of 120 million reissued cards, 850,000 Chip-enabled tills and retailers able to accept Chip & PIN payments rising to the forecast 80 per cent by mid-2005.
Alan Stephenson-Brown added: "For some time, we have been urging retailers to work with their telecommunications and banking provider to review network capacity and to ensure that they are not taken by surprise when cards and accredited terminals come on-stream."
TNS has been working with UK retailers including Sainsburys' and acquiring banks, terminal manufacturers and retailers to support roll out Chip & PIN.
Darren Clark, Financial Services Manager, Sainsburys commented: "Sainsburys' has taken the opportunity to review its communications infrastructure, as part of the replatforming of its Central EFT system. Sainsburys has future proofed its requirements to expected volumes in December 2007 and to take account of the increased size of messages that will result from Chip and PIN."
Demand for additional capacity and faster transactions will continue to increase as Chip & PIN leads to wider usage of plastic cards to pay at self-service kiosks and vending machines and as the Chip is required to store more customer and payments related data. APACS predicts the volume of credit and debit card transactions will double by 2012.
To support retail and banking customers with Chip & PIN, TNS has upgraded its private network to be EMV compliant ahead of the 1st January deadline, expanding network infrastructure and leased line connectivity to accept larger packet sizes to accommodate the additional data. The company has worked with APACS to develop a unique standard enabling IP data which enters the network from Chip & PIN terminals to be converted into the X.25 protocol preferred by banks' legacy systems.