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Personal chip and pin machines for shoppers

New device to tackle online fraud

Online shoppers could soon be required to use ‘chip and pin’ machines in their own homes in a bid to tackle internet fraud.

A number of High Street banks are already planning to send out millions of card-reading devices in the coming months for online customers wanting to transfer money from their account to a third party.

If successful, the system could be rolled out to cover all online transactions such as internet sales through popular e-retail websites, card issuers and payment association APACS suggested today.

Last year, online banking fraud costs UK banks £33.5 million, up 44 per cent on figures from 2005.

Fraud barrier

To combat the rising trend, the banking community hopes that ‘multi-layer authentication’ may prove a barrier to people trying to defraud customers.

Card reading machines the size of pocket calculators will be sent out to customers of banks and building societies – including NatWest, Barclays and Nationwide – over the months to come.

When making a bank transfer to a third party, online customers will have to insert their card into the machine and type in their PIN to identify themselves.

A randomly-generated number will then appear on the reader’s display screen, which will need to be typed into the computer before a transfer can be authorised.

Hundreds of thousands of the machines will be sent to customers free of charge over the next few months.

Lloyds TSB trial

Lloyds TSB has already been trialling similar technology that uses a key-ring style number generator and plans to expand the initiative.

It is hoped the technology will thwart fraudsters who are able to use sophisticated software to record the passwords and card numbers of online consumers.

Although initially intended for online banking customers, APACS said the technology could be used in the future when buying goods online.

Mark Bowerman, spokesman at APACS said: ‘That is the next step. First of all we need to get these devices into use before introducing them into the shopping environment.’

Industry warning

If card providers do try to extend the system to online shoppers, they could face opposition from e-retailers.

James Roper, chief executive of IMRG – the industry body for online retailers – said: ‘The banks have been coming up with bizarre propositions for payments for many years and it is a source of frustration for people in the online retail community.

‘By introducing this gizmo, it is yet another thing to leave on the bus, it will confuse people, it will be compromised and it will be out of date by the time it comes on the marketplace.’

He added: ‘It will be introduced and fail.’

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