What is Chip and PIN?
Why must I change?
What is the Impact?
What are the benefits?
What steps must I take?
How can I minimise the cost?

What is Chip and PIN?

Over a million pounds are being lost every day within the UK because the magnetic stripe on the back of a plastic payment card is no longer secure enough. If no action is taken, this figure is expected to double by 2005.

To combat fraud, a microprocessor "chip" is being embedded in the front of the plastic card. The chip gives the card computer intelligence and has led to the name "smart card". The chip is significantly more complex than the magnetic stripe, and criminals will find it uneconomic to copy. Furthermore, the intelligence of the chip allows the card itself to check the cardholder's PIN (Personal Identification Number).

In the magnetic stripe world, PINs can only be checked remotely by the banks and, in the UK, have traditionally only been used at cash dispensers. The chip allows PIN to be used everywhere: signature checking at the point of sale will disappear. In February 2002, the Association for Payment Clearing Services (APACS) announced that they are taking steps to ensure that in 2005 all credit and debit card transactions will be authorised by the customer keying in their PIN rather than by signing a receipt.

The chip addresses "counterfeit" fraud where criminals skim the magnetic stripe and clone a card. The PIN addresses "lost and stolen" fraud where criminals could easily forge a signature. The chip establishes the validity of the card, the PIN that of the cardholder. Together, chip and PIN are expected to reduce UK card fraud by more than half.

See also:

why must I change?
what are the benefits?

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