This weekend marks 20 years since chip and pin fully replaced signatures for in-store card purchases, with the initiative transforming how people make day-to-day transactions long before people started digging out their mobile phone to pay.
The move enhanced security around card payments as customers put their four-digit personal identification number (pin) into a keypad to authorise a purchase, moving away from the “traditional” signature authorisation.
Banking and finance industry body UK Finance said that one of the key reasons for the introduction of chip and pin was to reduce “card-present” fraud, and magnetic stripe cloning or counterfeit card fraud.
It said the initiative worked, with a 95% reduction in losses to counterfeit card fraud over the past 20 years.
The UK’s love for chip and pin started when the deadline for full implementation of the scheme passed on Valentine’s Day (February 14) in 2006, with full implementation in place from February 15.
At that time, 99% of cardholders were thought to have at least one chip and pin-enabled card in their wallet.
Some security concerns were voiced around the time that the scheme was initially introduced, including that criminals may watch someone inputting their pin and then steal their card, and that some people could become a fraud target by carrying their pin details around with their card.
However, there were also significant concerns about the opportunities for fraudsters from using the old-style payment.
Ways to pay have transformed in the past 20 years, along with criminals’ tactics.
UK Finance said there are more than 25 million additional cards now in circulation compared with two decades ago.
Contactless payments were also introduced in 2007, initially with a limit of £10.
The current contactless card payment limit is £100 and in March the Financial Conduct Authority (FCA) will make changes to enable banks and payment providers with strong fraud controls to set their own limits in future, if they choose to.
Currently, contactless accounts for two-thirds (66%) of all credit card and three-quarters (76%) of UK debit card transactions, according to UK Finance.
Mobile payments have also grown rapidly, UK Finance said, with about half of people using mobile contactless payments at least once a month.
Despite the evolving way that people pay, UK Finance said that chip and pin remains important for higher value transactions, accounting for 30% of credit and debit card payments by value.
As a result, the average chip and pin transaction is £93 compared with an average of £17 for a contactless payment.