How It Works
To solve this, banks and retailers are replacing traditional magnetic stripe equipment with smartcard technology, where credit and debit cards contain an embedded microchip and are authenticated automatically using a personal identification number (PIN). When a customer wishes to pay for goods using this system, the card is placed into a "Point of Sale" terminal or a modified swipe-card reader, which accesses the chip on the card. Once the card has been verified as authentic, the customer enters a 4-digit PIN, which is submitted to the chip on the smartcard; if the two match, the chip tells the terminal the PIN was correct, otherwise it informs it the PIN was incorrect.
France has cut card fraud by more than 80%. Chip and PIN is the name given to the initiative in the UK; other countries are launching their own systems based on the EMV standard, which is a group effort between Europay, MasterCard and VISA. By the end of 2004 100 countries should have been using compatible systems based on this standard.
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