It has been described as the biggest change to hit British retailing since decimalisation 34 years ago. So why are fears mounting that Chip and PIN is going to be a disaster that could cost retailers millions? From January 1, all in-store transactions by credit or debit card will have to be with done by chip and PIN. More than 100 million new micro-chipped credit and debit cards are being mailed out to 40 million shoppers, and half a million chip and PIN-ready tills have been installed in shops and stores.
The UK’s big grocery retailers, with the exception of Sainsbury, are ready for the January 1 deadline and say they anticipate no major problems.
However, the entire system hangs on one crucial nail - the ability of customers to remember their PIN numbers. The problem is not as silly as it sounds. The organisation PA Consulting, which conducted a survey in the summer of consumers’ attitudes to chip and PIN, calls this phenomenon the stumble rate and says it found a quarter of all people it asked had failed to remember their PINs the last time they tried to use them in a shop. What then happens, typically, is that they try to use another card, or offer to sign a slip in the old-fashioned way. All this adds seconds to the till time - Tesco has estimated that every extra second at the till adds £1m a
year to its labour costs. Arguably worse from a retailer’s viewpoint is that six out of 10 people said if they couldn’t use their card because they had forgotten their PIN - from January 1, they are not supposed to be allowed to sign a credit card slip - they would not return to the store at a later date to complete the transaction.
The rollout of the new system is being co-ordinated by Chip and Pin Ltd, a joint venture involving all the major card issuers. While it admits that almost 30% of people, when asked, have problems remembering their PIN, the organisation’s spokeswoman, Sandra Quinn, says: “The research shows that very few of us feel we have difficulties. Remembering our PINs at the checkout will get easier and easier as chip and PIN rolls out. With more outlets upgrading to the new technology, we will use our PINs instead of signing at increasing numbers of shops, restaurants, bars and hotels, and the more often we use them, the less likely we are to forget them.”
PA Consulting’s Alastair Charatan, however, fears that while people are getting familiar with the system, there is a significant minority, particularly those people who use three, four or more credits and debit cards all with different PIN numbers and who cannot remember all those numbers, who may be a problem. “You only need 10% or 20% of customers to take 30 seconds extra at the till to have quite an impact. I would be surprised if we find there are no lost sales. We estimate there could be a blip of 1% to 2% in lost sales in January and February because of the impact of the arrival of chip and PIN at the till, and that’s quite a significant figure.”
Chip and PIN Ltd has suggested a series of methods for people to remember their PINs, including “visualising numbers as objects relating to their shapes, linking them to important dates, or rhyming them with other words”.
A more practical solution is being marketed by PinWin, which supplies an easy-to-use system that allows people to encode up to six PIN numbers using a single number and letter. PinWin has been offering the cards to retailers to use as a promotional device to educate customers in the new system.
Apart from Sainsbury, which admitted in August that it would miss the deadline for installing chip and Pin-compatible till systems in all its stores by three months, blaming the extensive changes it had made to its IT systems in the past three years, other grocery retailers are largely ready for the changeover, and say they have had no difficulties so far with customers.
Tesco insists that many potential difficulties were overcome during the trial of the system in Northampton last year, and “customers are reacting well. Those already with chip and PIN-enabled cards are having no problem getting used to the new technology.”
A spokesman for Morrisons, which has had chip and PIN in all its stores since July, says: “Shoppers continue to tell us how much they are in favour of the system, knowing it will help combat fraud.”
Asda says its roll-out across 11,000 tills has been made easier thanks to the trial of the system in Corby and the help of Wal-Mart’s IT division. “We haven’t really had any problems - for us it’s as quick or quicker than signing a slip, and there has been no issue in terms of lengthening queue times,” says spokesman Dominic Burch.
Among the c-store operators, Londis has successfully run trial installations at three stores and is beginning complete rollout. The only problems, says spokeswoman Amanda Mann, “apart from a few early configuration issues, have been operational issues at the bank end; that and the lack of PIN-enabled cards to start with”.
Spar, according to IT controller Roy Ford, has got a lot further, with 800 installations completed and only 10% of stores to go. It has, he says, “been a nightmare”. Spar was an early adopter but the credit card companies changed the requirements in the middle of installation. However, Spar had received a lot of help from the Royal Bank of Scotland, and retailers had been supportive once they were sold the system as a means of combating fraud.
However, says Ford, Spar is expecting its retailers to have to offer customers who forget their PINs the opportunity to sign a slip instead, despite the fraud risk, for at least three months after January 1. “It’s a business decision,” he said. “If a customer is a regular, and hasn’t got their PIN, do you really want to anger them by refusing their card, and turn down £20 of sales?”
The UK’s big grocery retailers, with the exception of Sainsbury, are ready for the January 1 deadline and say they anticipate no major problems.
However, the entire system hangs on one crucial nail - the ability of customers to remember their PIN numbers. The problem is not as silly as it sounds. The organisation PA Consulting, which conducted a survey in the summer of consumers’ attitudes to chip and PIN, calls this phenomenon the stumble rate and says it found a quarter of all people it asked had failed to remember their PINs the last time they tried to use them in a shop. What then happens, typically, is that they try to use another card, or offer to sign a slip in the old-fashioned way. All this adds seconds to the till time - Tesco has estimated that every extra second at the till adds £1m a
year to its labour costs. Arguably worse from a retailer’s viewpoint is that six out of 10 people said if they couldn’t use their card because they had forgotten their PIN - from January 1, they are not supposed to be allowed to sign a credit card slip - they would not return to the store at a later date to complete the transaction.
The rollout of the new system is being co-ordinated by Chip and Pin Ltd, a joint venture involving all the major card issuers. While it admits that almost 30% of people, when asked, have problems remembering their PIN, the organisation’s spokeswoman, Sandra Quinn, says: “The research shows that very few of us feel we have difficulties. Remembering our PINs at the checkout will get easier and easier as chip and PIN rolls out. With more outlets upgrading to the new technology, we will use our PINs instead of signing at increasing numbers of shops, restaurants, bars and hotels, and the more often we use them, the less likely we are to forget them.”
PA Consulting’s Alastair Charatan, however, fears that while people are getting familiar with the system, there is a significant minority, particularly those people who use three, four or more credits and debit cards all with different PIN numbers and who cannot remember all those numbers, who may be a problem. “You only need 10% or 20% of customers to take 30 seconds extra at the till to have quite an impact. I would be surprised if we find there are no lost sales. We estimate there could be a blip of 1% to 2% in lost sales in January and February because of the impact of the arrival of chip and PIN at the till, and that’s quite a significant figure.”
Chip and PIN Ltd has suggested a series of methods for people to remember their PINs, including “visualising numbers as objects relating to their shapes, linking them to important dates, or rhyming them with other words”.
A more practical solution is being marketed by PinWin, which supplies an easy-to-use system that allows people to encode up to six PIN numbers using a single number and letter. PinWin has been offering the cards to retailers to use as a promotional device to educate customers in the new system.
Apart from Sainsbury, which admitted in August that it would miss the deadline for installing chip and Pin-compatible till systems in all its stores by three months, blaming the extensive changes it had made to its IT systems in the past three years, other grocery retailers are largely ready for the changeover, and say they have had no difficulties so far with customers.
Tesco insists that many potential difficulties were overcome during the trial of the system in Northampton last year, and “customers are reacting well. Those already with chip and PIN-enabled cards are having no problem getting used to the new technology.”
A spokesman for Morrisons, which has had chip and PIN in all its stores since July, says: “Shoppers continue to tell us how much they are in favour of the system, knowing it will help combat fraud.”
Asda says its roll-out across 11,000 tills has been made easier thanks to the trial of the system in Corby and the help of Wal-Mart’s IT division. “We haven’t really had any problems - for us it’s as quick or quicker than signing a slip, and there has been no issue in terms of lengthening queue times,” says spokesman Dominic Burch.
Among the c-store operators, Londis has successfully run trial installations at three stores and is beginning complete rollout. The only problems, says spokeswoman Amanda Mann, “apart from a few early configuration issues, have been operational issues at the bank end; that and the lack of PIN-enabled cards to start with”.
Spar, according to IT controller Roy Ford, has got a lot further, with 800 installations completed and only 10% of stores to go. It has, he says, “been a nightmare”. Spar was an early adopter but the credit card companies changed the requirements in the middle of installation. However, Spar had received a lot of help from the Royal Bank of Scotland, and retailers had been supportive once they were sold the system as a means of combating fraud.
However, says Ford, Spar is expecting its retailers to have to offer customers who forget their PINs the opportunity to sign a slip instead, despite the fraud risk, for at least three months after January 1. “It’s a business decision,” he said. “If a customer is a regular, and hasn’t got their PIN, do you really want to anger them by refusing their card, and turn down £20 of sales?”
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