From the Archive: Chip+PIN
‘From the Archive’ is the regular column that revisits some of the more interesting retail stories covered over the past 30 years by Glynn Davis for a variety of publications.
This period covers many seismic structural changes in the industry including the emergence of the internet. Alongside the actual stories Glynn will be adding commentary around each of the pieces that will seek to put the articles into context with today’s landscape.
Subscribe to TRBFrom Retail Systems (December – January 2006)
For people today who are almost programmed to contactless payments let me tell you it was very different back in the mid-2000s when many of us were still paying for goods using credit and debit cards with magnetic stripes. These required a signature for verification, or by physically stamping card details onto paper slips, which were then physically sent on for processing.
This article from the mid-2000s period was one of many I wrote covering the UK’s slow-moving upgrade to chip and PIN payments. The technology was there but the scenario was complicated by the various stakeholders involved – banks, card schemes, retailers and consumers – and nobody fancied the costs of upgrading cards and technology until there was a critical mass of people using such a payment method. It was a chicken and egg scenario for sure.
Cards needed to be reprogrammed, customers needed to replace their old cards, retailers needed to invest in new PIN reading devices in stores, and the financial industry needed to upgrade its antiquated systems and processes. The situation was complicated by the lengthy certification programmes retailers had to go through with the banks before they could accept Chip and PIN transactions.
The risks to retailers from not implementing the new kit was the likelihood of facing an increase in costly chargebacks from the banks when they identify suspect transactions and throw them back at the retailer. Non-Chip and PIN retailers were told they would be targets for fraudsters who migrated to less secure merchants still reliant on the old magnetic stripes.
Surveys at the time showed how Chip and PIN was reducing the overall losses related to card fraud for retailers, which the banks were using as evidence to convince retailers to invest in the technology. But what they were less keen to talk about was the rising levels of card fraud from Card Not Present (CNP) transactions. These had largely been related to purchases made over the phone but with the advent of the internet the volume of such transactions was exploding as the fraudsters moved online. New tech was needed to address this issue, but that’s another story.
All the stakeholders ultimately jumped on-board and chip and PIN became the ubiquitous payment method in retail stores. This has, of course, since been replaced by contactless but just as with chip and PIN this also involved a lot of feet-dragging before it became the de facto payment method.
The first contactless cards in the UK were issued by Barclaycard in September 2007 and in March 2008 Eat became the first restaurant chain to adopt contactless. I can recall a conversation at the time with the company about the number of contactless payments it had received at its trial store in London’s Moorgate. In the first week I was told it was “one”. When I enquired whether this was one hundred or 1,000 transactions I was informed it was “one”. Clearly this did not remain the case for long.
