Chip and PIN Overview
Why is the UK implementing Chip and PIN?
Current card technology is based on the magnetic strip. It is easy and inexpensive to create counterfeit magnetic cards, which is one of the reasons why UK card fraud was £402.4 million in 2003. Credit and debit card fraud is an international problem and is being tackled by the implementation of Chip and PIN cards on a global scale; these cards are being implemented to the agreed international Europay, Mastercard and Visa (EMV) standards. Chip and PIN should drastically reduce credit card fraud; Chip and PIN cards are difficult and expensive to clone, and the Chip has the intelligence to disable the card if numerous odd transactions occur.
What is Chip and PIN?
Chip and PIN provides dual security. The Chip is a computer microchip which is powered when inserted into a card reader, i.e. when inserted into a PINpad. The chip establishes that the card itself is genuine. The PIN, which is known only to the cardholder, is entered and the chip checks that the PIN is valid, proving that the card presenter is the cardholder. The Chip has been designed to combat counterfeit card fraud and the PIN to combat fraud arising from lost or stolen cards, where criminals could easily forge a signature.
When does it start?
From the 1st January 2005 all retailers in the UK are required to be Chip and PIN certified in order to avoid financial responsibility for fraudulent card activities.
Why should the retailer adopt this technology?
The main reason that retailers should adopt this technology is the shift in the liability for card fraud. Currently the banking industry pays for fraudulent card transactions (£402.4 million in 2003 in the UK), from the 1st January 2005 non Chip and PIN retailers pay this in full if the fraud could have been prevented with Chip and PIN.
Criminals will target retailers with weaker security. If your business hasn't implemented Chip and PIN you will see an increase in card fraud against your business (estimated to be 3-11 times current levels); the difference is that your business will be liable for the cost.
There are many other benefits associated with implementing a certified Chip and PIN solution, including:
- A validated EMV Chip and PIN transaction guarantees payment from the bank to the merchant.
- Lower acquirer transaction fees.
Retailers are being offered lower acquirer transaction fees if they process transactions using Chip and PIN technology. For example, from the savings Tesco will make on acquirer transaction fees they will have paid for their Chip and PIN implementation within 18 months. - Reducing time at the point of sale (POS).
Cashiers will not need to print an invoice or check customers' signatures. - Potential to use the Chip technology for other applications, such as loyalty schemes.
In addition, if you choose BOM's solution you can eliminate payment queues by taking the point of sale and payment to the customer. For example, if your business suffers from long payment queues at certain times you could queue bust with staff going to the customer to accept Chip and PIN payment using Clue® PINPOS handheld devices. Alternatively, you could review whether you need to have physical tills at all or whether it's more appropriate for your staff to have handheld point-of-sale devices. Clue® PINPOS enables your staff to go to the customer, enter sale details in the POS unit and accept payment (Chip and PIN and other forms of payment). You can also defer payment and accept payment later - perfect for restaurants and hospitality.
As a retailer I need to implement Chip and PIN, but where do I start?
If you haven't already done so, act now. The liability for fraudulent activity has already passed to you as the retailer. You need to:
- Assess Chip and PIN in relation to your business requirements.
- Ensure you choose a Chip and PINpad supplier that already has the relevant certifications, such as BOM.
- Implement the Chip and PIN solution.
BOM will work with you to ensure a smooth transition. - Achieve Acquirer Approval.
BOM will work with you and your acquirer to obtain end-to-end approval of the total integrated solution using your infrastructure.
1. Assess your Chip and PIN business requirements
You need to change the way in which your business accepts payment, so why not take this opportunity to review how your business operates. Can you provide greater customer satisfaction and business efficiencies by taking the point of sale to your customer, rather than forcing your customer to pay at a fixed till? Do you need to take the sale to the customer and provide for Chip and PIN? If so, BOM has the solution you need - Clue® PINPOS.
You will also need to assess changes to your operating procedures, staff training and customer education. BOM has been providing tailor-made business solutions for 45 years, we can help you initiate and successfully implement Chip and PIN.
2. Ensure you choose a Chip and PINpad manufacturer that already has the relevant certifications and requirements
Time and certification is of the essence. Implement products that already have the relevant certifications and requirements to avoid any risks or delays, such as Clue® PINPOS. For details see Clue® PINPOS Approvals.
Be wary of suppliers who don't yet have the certification as time is of the essence. BOM and our partnership company have already undergone the lengthy and rigorous testing procedure for our fully certified Chip and PIN solution.
You urgently need to implement a certified Chip and PIN solution to enable time for your acquirer to test your end-to-end system and to grant you approval; retailers who have not achieved acquirer approval are now liable for fraudulent card transactions (as from the 1st January 2005).
3. Implement the Chip and PIN solution
Apart from the physical changes to your infrastructure, you will need to consider changes to your operating procedures, staff training and customer education. BOM can guide you through these processes, ensuring a smooth transition right through to gaining acquirer approval.
4. Achieve Acquirer Approval
Once you have implemented the changes to your infrastructure to incorporate Chip and PIN, you then need to ensure you achieve acquirer approval.
BOM is currently working with several major UK airlines to get acquirer accreditation for their implementations of the Clue® Trader point-of-sale solution.
Further explanation for Chip and PIN certification can be found on the Chip and PIN website: http://www.chipandpin.co.uk
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