Shopping revolution is on the cards

BRITAIN'S big banks are poised to roll out a £12m advertising campaign, alerting shoppers to what they say is the biggest change in the way we pay for goods and services since decimalisation in 1971.

The ads, devised by Saatchi & Saatchi, will hit TV screens next month with the slogan 'Safety in Numbers' and will introduce shoppers to new technology requiring them to key in a code every time they pay with plastic.

'Chip and PIN' technology does away with the need for customers to sign when they use their debit or credit cards. Banks expect it to slash the £424m annual cost of card fraud by between 50% and 80%.

They and retailers have been gearing up for the change for months with the total cost of the new technology and training expected to be £1.1bn.

The ad campaign is one of the biggest of its kind - far larger than the £4.7m spent by Transport for London alerting people to the congestion charge but still smaller than the record £25.5m campaign to explain the telephone code changes of two years ago.

The banks explored the possibility of using David Beckham to front their campaign but changed their minds after discovering he cost £50,000 a day.

According to Sandra Quinn, a spokeswoman for the bank clearing system Apacs, which is co-ordinating the move, it is crucial that people understand the change. '

'It's intrinsically very simple,' she said. 'But people start from knowing nothing about it. We're asking people to change the way they make payments.'

Eight million cards with the new technology have already been issued (they are indistinguishable from traditional cards). Barclaycard, HSBC, Lloyds TSB and Royal Bank of Scotland are among the heavyweight banks already sending out chip and PIN cards.

By spring, 50% of cardholders will have chip and PIN-enabled cards, rising to 90% by the end of the year.

Retailers are installing the necessary card readers. Safeway is leading the charge - all its checkouts are already chip and PIN ready. Most of the multiple chains have been experimenting in the pilot scheme in Northampton, home of Barclaycard.

So far, more than 100,000 retailers and restaurants have already switched to the new system. Big players with the budgets and expertise, and small shops which merely rent terminals from the bank, are most advanced. Mid-ranking retailers are less keen.

Chip and PIN will, it is hoped, combat fraud by ordinary card thieves and 'skimmers' - those who use information contained on the magnetic strip on the back of traditional cards to make usable replicas.

The embedded microchip on each new card contains the encoded PIN (personal identification number), enabling the merchant to ensure the person using the card is the rightful owner. Unless they know the PIN, they cannot use the card.

The encryption technology within each chip is advanced. 'No one has ever yet cracked the code,' according to a banking industry spokesman.

Fraud is a major headache for banks, rising by between 15% and 20% in recent years. Apacs predicts that, without the new technology, fraud would have topped £1bn by 2008.

The new system will only immediately tackle 'card present fraud' and will not catch people ordering goods by phone or online. However, in theory, this too could eventually be achieved via card-reading machines attached to home PCs and phones.

The pilot project has gone relatively smoothly. Apacs says 80% of people in the Northampton trial were in favour of the new system and 95% of people in a separate survey were confident it would be easy to use. The majority of plastic transactions will be chip and PIN by next year, it adds.

There have been hiccups. Marks & Spencer said card-readers were ripping the chips off some cards because they were not strong enough. Apacs says this affected 'a ridiculously small number'.

Jeremy Wyman, business systems manager at Safeway, is an enthusiastic cheerleader of the new system and says cardholders will very quickly adapt. 'It takes customers on average three goes to be competent,' he said.

Keying in the digits is quicker than signing, he said. 'Theoretically, across the whole country, it will reduce queues.'

Then there are the savings from fraud and even tillpaper receipts. Safeway will eventually use 13,000 miles less till paper a year, saving it £548,000.

Wyman points to France, which has had the system for years, reducing fraud by 80%. 'If the French can do it, we can do it,' he said.

How to use the new system

CARDHOLDERS get a new card and their own secret four-digit code, or PIN. Every time they use their cards in person, they will have to insert them in the device at the till and enter the PIN on a keypad. In restaurants, waiters will bring portable terminals to the table, and these will be modified to accept tips. Cards are frozen and unusable after three wrong entries.

There is no need to sign except where merchants do not have the new technology. Cards still need to be signed on the back. Customers are able to change their PINs (to a more easily remembered number, say) at a cash machine.