Looking back on a decade of chip and PIN

As one of the most successful retail technologies of recent times celebrates its tenth birthday, card payments expert Clive Kahn examines its impact on UK retail

The first chip and PIN-enabled payment terminals were installed in stores in Northampton on 19 May 1993. Twelve months later the technology was considered so successful that it began rolling out across the country.

By ‘Pin Day,’ on 14 February 2006, when the technology became universally available, chip and PIN payments made up 99.8% of all card transactions, with more than 150 chip and PIN transactions taking place every second.

The influence of chip and PIN was immediate, and yet, a decade on, most of us forget the way it has impacted upon our lives.

Six months after Pin Day, theUK Payments Administration released figures citing a £60-million reduction in counterfeiting and fraud on lost and stolen cards. Such figures are now updated regularly by The UK Cards Association, which recently reported that skimming/cloning fraud had fallen dramatically, from £144.3m in 2007 to £42.1m in 2012.

Fraudsters forced to change tack

Clive Kahn, chief executive of CardSave, which supplies card payment solutions to small retailers in the UK, said that when figures compiled by The UK Cards Association and the areas in which card fraud has fallen are examined, it becomes clear that those where chip and PIN acts as a safeguard have seen the biggest difference, while others have had undergone minimal change. Identity theft, for example, when fraudsters gain access to enough information so as to ‘steal’ an identity, has dropped just £2m.

“This reduction in fraud has changed the consumer’s attitude to shopping,” declared Kahn. “Knowing that cards cannot be used in store without a PIN, patrons have a much greater sense of security. When paying by card required only a signature ID, the fear of fraud meant people were more inclined to pay using either cash or a revocable cheque.”

Kahn observed that the shopping habits of the British public have changed enormously in the last decade. Two technologies can be seen as the catalysts for these changes: the internet and chip and PIN.

Consumers embrace change

He explained: “One is a virtual tool, the other clearly visible on debit and credit cards and in retail stores. You wouldn’t naturally place chip and PIN in the same league as the internet, but consider this: both have made the shopping experience more convenient, less stressful and much faster for consumers, and they have both encouraged card spending to the point that media stories proclaiming the death of cash are almost commonplace.”

These days, he said that, with most people owning a chip and PIN-enabled debit or credit card, transactions are completed in seconds and the weekend shop is faster and less stressful. Now the Payments Council is considering scrapping cheques altogether. At one stage it said they would be phased out by 2018, though this statement was later rescinded.

“Nowadays new payment technologies designed to build on its success are introduced on a regular basis; in recent years, contactless cards, mobile wallets, near field communication and now mobile phone terminals have been promoted,” Kahn continued, adding, “one has yet had the impact of chip and PIN”.

Building payment confidence

Chip and PIN also made possible the large-scale use of self-service tills. “Love them or hate them, they help thousands of customers experience a streamlined shopping experience without the need for ID verification from a shop assistant,”he said. “Consumers appreciate the feeling of privacy and anonymity that self-service tills bring and enjoy being in control of their checkout experience.”

Britain has become a mature chip and PIN nation. “In the 10 years since its introduction it has revolutionised the payment process, improved the customer shopping experience, helped retailers increase their profit margins by cutting the time at the till and reduced card fraud,” Kahn concluded.“Despite the influx of new payment technologies available, I predict we will rely on chip and PIN for a long time yet.”