You can't pick up a magazine or attend a retail show event these days without hearing it, and yet it seems retailers are still unclear about the impact of Chip and PIN. Many have delayed upgrading their EPoS systems because of serious concerns over the cost and complexity of the migration process...

So does Chip and PIN really demand an extensive system upgrade? The good news is - not necessarily. The Retail Update spoke to Derek Littlewood, Epson's Chip and PIN expert, to find out more.

Retail Update: Why is Chip and PIN being introduced?

Derek Littlewood: Plastic card fraud is currently running at about £600million and is increasing at a rate of 30% per annum. The main reason is that it is just too easy for fraudsters to cheat the system by cloning a card or forging the signature of the rightful owner.
Chip and PIN is a card transaction processing system which requires every payment card to be embedded with a unique chip (establishing it as the genuine article) rather than a magnetic stripe. In addition, the card holder is obliged to provide their PIN number, rather than a signature for card validation (ensuring they are who they claim to be). By making counterfeiting more difficult, as well as hugely expensive for the criminal, Chip and PIN has the potential to drastically reduce customer-present fraud. In fact, when fully implemented, the system is expected to more than halve the overall UK fraud losses on card transactions.

RU: Are there any other benefits?

DL: Better customer service will be a major advantage because the operator will not have to make a judgement on the signature, and it will also be easier and more cost effective to administrate. ItÕs also an opportunity for retailers to differentiate themselves as the more sophisticated chip cards will be capable of supporting value added services such as self-scanning, retailer loyalty schemes or an electronic purse.

RU: So what will retailers need for Chip and PIN transactions?

DL: The main elements of a Chip and PIN system are a secure PIN entry device, a chip card reader, and controlling software which must be certified to EMV Level 1 (hardware) and Level 2 (software) - EMV is the international standard for chip-based payment cards set out by Europay, Mastercard and Visa. These items then link to existing EFT software and the PoS application.

RU: Retailers have been strongly advised to implement Chip and PIN before it is too late. What is the hurry?

DL: On 1 January 2005, retailers - not card issuers - will be liable for all fraudulent transactions which take place using the old plastic card technology. For those who fail to take action, the costs could run into £millions as fraudsters will inevitably gravitate towards the 'easier targets'. To ensure they are prepared in time, I'd advise retailers to contact their acquirer and equipment vendors now to discuss the best solution for their particular trading environment.

RU: What are the options for Epson system users?

DL: All Epson systems products - the IR integrated system, the MR modular system and the SR speciality system will soon be available with a reliable, easy-to-use combined PIN pad and smart card reader. It's designed to meet the latest EMV hardware and software standards and therefore represents a cost-effective way to adopt Chip and PIN technology. For more information, email dlittlewood@epson.co.uk

RU: What can retailers do to find out more about Chip and PIN?

DL: For further information, retailers should speak to their solution provider. They can also visit the official website at www.chipandpin.co.uk while the British Retail Consortium also provides guidance and shares information among members (www.brc.org.uk).