Chip and Pin 'could backfire'

CHIP and Pin technology is leaving consumers open to exploitation from financial institutions and increased risk of attacks from fraudsters.

A damning research paper from Cambridge University's Computer department has claimed the system is riddled with flaws that can be exploited by crooks.

The paper, 'Chip and Spin', said banks' primary motive for introducing the technology is to shift the liability for card fraud onto retailers and consumers.

The technology was designed to eradicate card fraud at the point of sale by requesting a Pin number rather than relying on a signature.

Cambridge Professor Ross Anderson warned fraud victims will find it increasingly difficult to prove they have had cash stolen from their accounts.

He said: 'If a cheque, or signed paper, is forged, the signature is often nothing like the customer's. But using a Pin takes us into more difficult territory.

'If a card forger observed a Pin as it was used, or a bank insider stole it from a computer system, then there is obvious way to find out.'

He said banks are likely to adopt the same attitude as they did with 'phantom withdrawals' from ATMs in the mid-90s. They refused to pay out to customers that claimed they had been defrauded because they believed their systems were too secure.

In addition, the paper added that the technology was likely to lead to an increase in the number of Pins stolen due to the position of the terminals in shops.

It claim that, unlike ATMs, the terminals are too open, making 'shoulder surfing' easy. Anderson said: 'As Pins become more important and more available, and as people are encouraged to use the same Pin for multiple cards, the shopper's purse will become a more attractive target for both pickpockets and muggers.'

It concludes that the technology is likely to cut fraud in the short-term, but it will return in the longer-term as criminal gangs develop methods to work around the system and increase cross-border fraud.