Credit card security system on track for success

Since June, chip and PIN technology has cost Irish banks and retailers up to €200m. But despite teething problems, it is here to stay, writes Niamh Hennessy.

CHIP and PIN was introduced in Irish shops in June last year and the changeover is estimated to have cost banks and retailers in this country up to €200 million.

This is not a trial and the concept is here to stay. It was introduced to bring increased security to using credit cards, so has it worked?

According to industry experts, it had teething problems in the early days but the problems are sorting themselves out and it’s on track for success.

Una Dillon of the Irish Payment Services Organisation (IPSO) said: “Since the roll-out began, the industry has already seen a decrease in the number of counterfeit cases and skimming in Ireland.

“In Britain they have seen a 29% decrease in these types of fraud since chip and PIN roll-out became established.”

She said we were lucky Britain started their roll-out before we did in Ireland, as there were a lot of technical issues experienced in Britain from which we learned and so could avoid.

“Initially retailers commented that transactions seemed to be slower but these issues have mostly been ironed out and it has also been proven to take a lot less time to key in a PIN than for a retailer to find a pen, hand it over, have someone sign the receipt, check the signature and hand back the pen.”

It sounds like a wonderful concept, but what happens when a customer forgets their PIN number at a busy check-out queue?

The decision to allow the transaction to go ahead, say IPSO, rests with the retailer.

“During the migration period, cardholders are permitted by most retailers to sign for transactions when they forget their PIN,” said Ms Dillon.

“When a customer forgets their PIN, the retailer can choose to allow the transaction to fall back to signature verification, which is allowed for the transition period.”

The industry has not yet decided on a date for the end of the transition period, but according to IPSO this will be decided once all cards and terminals have been updated to chip and PIN.

At that time retailers will be required to accept PIN only for card transactions and customers have three chances to enter their PIN number correctly.

“Retailers will still have the ability to roll back to signature but at a risk to themselves. That is, if the transaction turns out to be fraudulent and the retailer has not accepted a PIN for the transaction, they could be liable for the transaction value,” said Ms Dillon.

Eddie Ryan of Bank of Ireland said: “You can change the PIN number at any ATM to one that you will remember easily.

“About 10% of transactions on chipped cards are not carried out using the PIN. Not every merchant, especially petrol stations have the facilities for the chip and PIN yet.”

The project involves the roll-out of three million new cards and 40,000 terminals. IPSO expect the majority of cards to be rolled out by the end of next month, with the last of the chip cards going out in the first half of next year.

So far 89% of ATMs have been upgraded to chip and PIN and 94% of retailer terminals.

Mr Ryan said Britain is targeting February 14 as the date when chip and PIN will be the only accepted form of credit card payment.

The system is only in its development stages here and according to experts we should see more developments in years to come.

“One concept which some restaurants already use is the mobile device for entering your PIN number, where they will bring the device down to your table,” he said.

“In time you will find that your PIN could be used to carry details like your library card and health records. It’s multi-functional and almost anything can be built into it.”

Although all countries across the EU are obliged to introduce the new system, reports say Ireland is in the top three for roll out levels.

“Most of our chip cards have been rolled out and card terminals have been updated to accept chip cards, compared to some countries that have only started their roll-out,” she added.

The concept was first introduced in France about eight years ago and now all countries in Europe are mandated to implement chip and PIN and most will have started roll-out at this stage.

What is surprising however is that the United States, where most of the population has a credit card, has failed to implement the system.

Although there were considerable costs in setting up the system, reports say it will be worth it in the end.

Mr Ryan said: “It is going far better than expected and it is making the system a lot more secure. It’s the only way to combat fraud.”