Cardholder judgment is still crucial in maintaining card security, writes Claire Shoesmith

Standing in the queue waiting to pay for an item at clothes retailer Gap, the woman in front of me was asked by the shop assistant if she knew her card's pin number. Yes, she replied and proceeded to dictate the supposedly secret four-digit number to the man behind the counter.

The point of the new chip and pin system - to be more secure than the traditional method of signing for your purchase - had obviously eluded this particular lady shopper. By revealing her pin to the shop assistant and indeed several of the people standing behind her in the queue, she had opened herself right up to fraud.

"That's the main thing we tell people," says Barry O'Mahony, chip and pin programme manager for the Irish Payment Services Organisation (Ipso). "Make sure you keep your pin secret. Don't share it with anybody." Currently, about 85 per cent of the Republic's 2.2 million credit cards and 1.3 million debit cards have been updated so that they contain the new chip and pin technology and, according to O'Mahony, the balance will be more or less complete by the beginning of next year.

At the moment, cardholders in both the Republic and the UK with an updated card can opt out of inputting their pin, as the personal identification number is more commonly known, and still sign for the payment. But from February 14th, retailers in the UK will no longer accept signatures as authorisation, and anyone claiming not to know their pin will be asked to use a different method of payment.

"To enable chip and pin to do the job it's supposed to do, you need consumers not to be allowed to use their signatures any more," says Jemma Smith, a spokeswoman for Apacs, the UK payments association. "The aim is to protect cardholders from fraud and unless you have pin only, then anyone can still lift a card." In the UK, 117 million of the 140 million cards in circulation have been updated, according to Smith.

No date is set for the end of payments authorised by signatures in the Republic, but O'Mahony says that they will be setting a date in the new year and it probably won't be that far behind the UK deadline.

The majority of the machines that process the payments in Ireland are made by French group Ingenico and Irish software company Trintech. A spokeswoman for Ingenico estimates that the group, which has 14 different types of chip and machine, has about 60 per cent of the retail market in the Republic. Trintech, which is based in Dublin, supplies machines to retailers, including Debenhams and HMV.

As well as being considered to be safer - the chips are more difficult to clone than magnetic stripes and should therefore reduce the incidents of counterfeit fraud - the chip and pin payment system is easier to use than the traditional signature method, according to O'Mahony. You no longer need to stand around while the shop assistant rummages for a pen, and typing in your pin number takes less time than actually signing your name.

Research by a retail group in the UK found that while the actual payment authorisation made by the machine into which you type your pin takes slightly longer than the old system because its checks are more thorough, the overall process takes less time.

All of the Republic's banks, and the majority of the retailers who receive their payments systems from the banks, have switched to the new system, according to O'Mahony.

Most larger retailers such as supermarkets and department stores, which provide their own payment systems that link in with their stockrooms and order books, have also adopted the new system and the remainder will have to make the switch at the beginning of next year.

According to a spokeswoman for RGDATA, which represents small retailers in the Republic, companies have had few problems adapting and have simply accepted it as something that they have to do.

As far as consumers are concerned, O'Mahony doesn't believe that the phasing out of signature-approved payments will be a problem for the Irish. "People in Ireland have taken to it better than elsewhere," he says, adding that they are generally quite responsive to change.

"Take the changeover to the euro for instance. That was all over in nine days," he says.

So apart from putting an end to us leaving our autographs scattered around the city as evidence of our most recent shopping splurge, is the introduction of chip and pin going to make any difference to our lives? Not on a daily basis, but industry experts are hoping that it will go some way towards eradicating much of Europe's €2 billion annual card fraud problem.

The fact that the use of the pin is designed to help cut incidents of fraudulent use of lost or stolen cards by eliminating the possibility of signature forgery may well be good news for the 18 per cent of Irish consumers surveyed by credit card issuer Visa, who claimed to have been the victim of credit or debit card fraud. Card fraud in the Republic is estimated to have reached €9.6 million last year.

However, chip and pin won't wipe out all types of fraud. In fact, Dr Emily Finch of the Norwich Law School at the University of East Anglia, said recently that it actually makes us less secure against fraud. She says that the internet and the electronic environment in which we now live make it easier for us to be tricked or suffer identify theft.

According to Dr Finch, where fraudsters used to hire youngsters to go out and steal cards, they now first go after the person's bank personal identification numbers, then they follow the person to see where they live and either steal or duplicate their card.

Worse still, chip and pin doesn't eradicate one of the most popular types of fraud, card-not-present incidents.

The theft of card details, which are used to buy goods over the phone or over the internet, is becoming increasingly frequent, according to Ipso.

A survey released last week by Apacs showed that while overall card fraud in the UK fell by 13 per cent in the first half of this year to £219 million (€322 million), a drop experts attribute to the introduction of the chip and pin payment system, internet and telephone card fraud leapt by almost a third. There are no figures for card fraud in Ireland for 2005, but Ipso confirmed that incidents involving counterfeit and lost card fraud have declined due to the introduction of chip and pin.

"The best piece of advice we can give is never share your pin with anyone," says O'Mahony. "Make sure you're not being overlooked when you are inputting your pin and make sure your cards are safe at all times."