Chip-and-pin retail chaos looms

Published on 27/12/2004 23:34

SHOPPERS and small retailers are completely ill-prepared for the introduction of mandatory chip-and-pin card purchases this weekend, consumer watchdogs and business leaders have warned.

From Saturday, retailers can refuse to process a card purchase if the buyer does not know their four-digit personal identification number (PIN). Surveys suggest that millions of people have no idea of their number, which could lead to ugly scenes at the January sales check-outs.

There are also concerns about the safety of the new technology, while some leading banks admit they will not have sent out all PINs until well into 2005. To add to the looming chaos, smaller shops and restaurants claim they have not been given enough time to introduce chip-and-pin machines. Tens of thousands of new terminals have already been installed across the UK in a bid to tighten up money transactions against the threat of fraud.

But the National Consumer Council said it was worried customers were being pushed into chip-and-pin. Janice Allen, NCC spokeswoman, said: "It is not clear consumers will benefit. If someone sees your pin being typed in and takes your card, it may be hard to prove you have been a victim of fraud."

Graeme Millar, of the Scottish Consumer Council, said he did not believe the new system was as popular or as widespread as the banks liked to suggest - and was concerned that it protected banks rather than consumers. "If it turns out to be safer, that’s fine, but I do worry about banks saying they will not be liable for fraud," he added. "The customer should have no less protection with chip-and-pin than they have in the past. At the end of the day it is not the consumer’s responsibility to protect themselves against fraud."

Chip-and-pin machines are commonplace at check-outs of supermarkets and other major retailers, but thousands of small businesses are struggling with the introduction and fear they could be forced to cover the cost of millions of pounds of fraud.

From 1 January, responsibility for money lost through fraud will pass from banks to retailers, in cases where chip-and-pin could have avoided losses.

Banks claim 85 per cent of retailers are ready for chip-and-pin credit and debit cards, but a new survey suggests a quarter of small businesses may not be prepared.

The survey, by Caterer and Hotelkeeper magazine and the British Hospitality Association (BHA), revealed almost a quarter of all businesses had not switched over to chip-and-pin check-outs, and said members had besieged it with calls because they were confused about the changes. Karishma Chandaria of the BHA said: "Smaller businesses are finding it more difficult to accommodate changes as they don’t have a company policy and are dealing with suppliers and banks themselves."

Mark Lewis, editor of Caterer and Hotelkeeper, said 26 per cent of those questioned believed they should have more time to prepare: "Banks and chip-and-pin suppliers need to be aware small restaurants and pubs are struggling to install the systems by 1 January and should help them as much as possible."

The implementation of the chip-and-pin system has been co-ordinated by a consortium of banks, building societies, retailers and card issuers as a way to cut fraud. A similar scheme in France is reported to have cut fraud by 10 per cent, by making it impossible to use a stolen credit card without knowing the PIN.

But big names like Barclays and HSBC have admitted that they have not yet sent chip-and-pin cards to nearly one in three customers.