New system of credit card use to begin

Shoppers will have to use pin numbers to pay with their debit or credit cards from tomorrow, when new measures to protect against bank fraud come into force. The traditional option of signing for card purchases will no longer be available, except in limited circumstances.

The change marks the final stage of the switch to "chip-and- pin" card technology and will contribute to further reductions in bank fraud, the Irish Payment Services Organisation (Ipso) has said.

Chip-and-pin technology makes the "skimming" or counterfeiting of cards more difficult, because an ATM reads the micro-chip on such bank cards as well as the magnetic strip. At present, forgers can use simple technology to copy a cardholder's details and copy them on to another card with a magnetic strip. A chip- and-pin card is more expensive to counterfeit.

However, Ipso has warned that criminal gangs are attempting to subvert the new measure by counterfeiting Irish cards and using them in countries where chip- and-pin technology is not available, especially eastern Europe.

From this weekend, retailers may turn away customers who do not know or recall their pin numbers. They could still accept payment by signature from certain customers - such as those with older cards and overseas visitors from countries where the new technology is not available - by allowing the customers to sign for the purchase, but they could be liable in the event of fraud. However, even if they opt for this approach, the cardholders' bank may refuse to authorise the payment.

Bank of Ireland and AIB said yesterday they planned to phase in the new measure over several months. As a result, some customers may still be able to bypass the chip technology by signing for purchases after this weekend, but only if their card has been issued by the same bank used by the retailer.

Bank fraud dropped last year for the first time since 2002, from €13 million in 2005 to €12.5 million last year, according to Ipso. It credits the spread of chip-and- pin technology and Garda intervention with a 65 per cent drop in the number of ATM skimming incidents.

Úna Dillon of Ipso said some retailers had "jumped the gun" by turning away cardholders who wanted to sign for purchases before this weekend's deadline.

While skimming is on the decline, other types of card fraud are on the rise, especially for mail order and internet purchases.