IPSO chip plan targets credit card fraudsters

Credit and debit card fraud in Ireland could virtually be eliminated by 2005 as a result of plans by the Irish Payment Services Organisation (IPSO) to introduce chip and PIN security technology on plastic cards.

Plastic card fraud cost the Irish banking industry around €5 million in 2000 and the figures for 2001 are expected to be significantly higher.

As part of IPSO's plans, a personal identification number (PIN) will be keyed in at the point of purchase as an alternative to the current method of signing a receipt. Chip technology further enhances card security as it eliminates the possibility of the card being copied, IPSO has said.

"The chip card is key. We see this as the central move to eradicate counterfeit fraud. The PIN is the added bonus, which provides even more security than signature," said Mr Stewart MacKinnon, chief executive of IPSO, the financial sector's umbrella body for payment services.

Credit and debit card fraud has been almost eliminated in France which unilaterally introduced chip and PIN cards more than 10 years ago.

Plans to introduce the enhanced security measures in Ireland are part of an EU-wide scheme under which the European banking industry should adopt specifications laid down by the international card associations, Europay/MasterCard and Visa, known as the EMV standard.

"It's a case of developing the standard and all moving together because fraud has an international character. It's not domestic, so we need to work together on this," said Mr MacKinnon.

The banking industry has undertaken to support a programme which will be introduced on a phased basis over the next three years and should be operational during 2005.

"As a programme of work, it probably equates to the euro changeover in terms of complexity and cost," said Mr MacKinnon.

The migration to the new chip and PIN cards will cost around €80 million, with the bulk of this being borne by the banking industry. In total, 2.4 million credit and debit cards will have to be re-issued, and around 45,000 point-of-sale terminals and 1,200 ATMs will have to be modified to accept the new cards.

"If we didn't take action, Ireland would have been a soft target for fraud and we could see a migration of fraud from countries which have introduced chip and PIN," said Mr MacKinnon.

"The biggest danger is that fraud migrates from a country that has imposed very strict security measures to a country where things are more relaxed, so I'm anxious that Ireland stays at the forefront of technology and that's what we're doing."

With Britain, where counterfeit card fraud reached £411 million sterling (€666 million) last year, planning to migrate to the EMV standard there was a real danger that Ireland would be targeted by international card fraudsters if the industry here did not introduce similar security measures, he said.

He expects the Irish public to adapt to the new cards very quickly. "With the introduction of the euro, the Irish consumers proved themselves very flexible and adaptable," he said.

"More people in Ireland have an ATM card than they have debit or credit cards. Everyone in the country is used to carrying around a four-digit number in their heads. The only difference is at the point of sale, they'll be asked to key in a PIN rather than a signature verification."

In the future, individual banks would be able to add functionality to their cards through the electronic chips, such as electronic purse schemes, said Mr MacKinnon.