Christmas is coming, and your credit cards are getting fat. The constant swiping of the plastic in your pocket brings seasonal joy for the retailers and humbug for your bank balance, but it's also a major IT challenge for Barclaycard, the UK's largest credit card provider.

Last year, the company processed seven million transactions per day in the run-up to Christmas. The computers running the authorisation system are capable of handling more than 300 transactions per second.

And with more than 100,000 retailers across Europe depending on Barclaycard to support their customers' credit card purchases, IT and operations director Steve Adams knows what is expected of his team.

"We need to make sure merchants aren't going to get a better service anywhere else," he said. "The amount of time the consumer spends in the payment process has to be kept to the absolute minimum. That's our product: effective payment processing."

Barclaycard's authorisation system has to be constantly available, and 99 per cent isn't good enough. The company uses specialist fault-tolerant Hewlett Packard (HP) NonStop servers, formerly known as Tandem, which was taken over by Compaq, and is now part of HP.

Apart from changing the vendor badges on the computer, Adams's main focus for the past three years has been establishing a resilient architecture to support the business.

Three data centres were consolidated into two, one running as a real-time mirror of the other. The new set-up went live in October last year, and costs 15 per cent less to run than the previous operation. But it's not just the IT that needed an overhaul, according to Adams.

"I can't think of an area where we haven't re-engineered the support processes," he explained. "The business continuity approach we've taken is to run 24x7. That takes some investment and management, but it's paying dividends now.

"We rehearse the use of hot standby twice a week, so we're never that far from recent memory for what we need to do if a problem occurs. Fortunately it hasn't happened yet."

Building trust
Confidence in the infrastructure is vital to shopkeepers, and it's becoming an increasingly important factor in developing web-based commerce. Most people still trust a waiter to disappear with their credit card for five minutes more than they do a secure website.

"We were one of the first credit card companies to offer an online guarantee," said Adams. "Most of it is about building confidence in using our services online. Our cardholders don't seem to have any lack of confidence in using online systems to make financial transactions with us."

He explained that online sales still represent a very small fraction of the transactions the company processes, but that the use of e-commerce is growing. About a quarter of the payments to settle customers' Barclaycard accounts are made online.

Another big part of building consumer confidence in e-commerce is tackling fraud. Barclaycard has developed advanced systems to monitor and detect unusual card activity and warn retailers, sometimes before a transaction is processed. And the company employs external security experts to perform penetration testing on its websites.

"The security routines we put our sites through are second to none," said Adams.

The approach has been such a success that the company has seen a drop in fraud over the past year. The combination of good technology and efficient processes is the key, as any IT security manager would agree.

"It's not necessarily what you have, it's how you use it," explained Adams.

But the way people buy is changing, and the humble credit card faces competition from new methods of payment. Barclaycard is preparing for an electronic cash future.

In 1998 the company launched one of the first online payment services. Called EPDQ - after the PDQ terminals used in shops to swipe cards - it's targeted at websites that don't want to invest in their own payments engine.

"We built into that a range of security features which go beyond what people would normally buy off the shelf. We're a bank and people expect us to provide that level of security and confidence," said Adams.

Barclaycard has teamed up with the four UK mobile networks to provide electronic top-ups for pay-as-you-go phones, and the volume of sales is doubling every 13 weeks. Adams explained that the principle is no different from credit card transactions; mobile minutes are just another type of currency.

Small change
Another growing sector is micropayments. Barclaycard has been involved in pilots with Sky TV, and worked with music industry guru Tony Wilson on a website called Music33. Customers can download music tracks purchased online for 33p each, and Barclaycard technology aggregates the payments.

"I've always thought that micropayments will happen, it's just where and what the vehicle is," said Adams. "It's those small services, or maybe interactive TV, where micropayments will find its niche. From a technology point of view, we're ready when the market is."

But in the short term, Barclaycard's efforts are focused on 'chip and pin' cards. All credit and debit cards must provide authorisation using an on-card chip and a customer pin code by 2005. Next year, Barclaycard is involved in its first major public trial of the technology in Northampton.

Smartcard products are available that could allow biometric security using fingerprints or eye scans, but Adams indicated that the public isn't ready for this yet.

"We'll roll out chip and pin, as it's what people are used to. The market research on retina scanning on cash points wasn't particularly promising. But people are used to using pin codes," he said.

Best keep a few good old-fashioned £5 notes hidden away. When we're all buying with electronic money, they may be worth more in nostalgia value one day.

THE FUTURE OF PAYMENT TECHNOLOGY

Chip and pin
By 2005, all debit and credit cards will have to be authorised using a combination of a 'smart' chip and the customer entering a pin code. The technology is already used widely in the US, and could mean the end of signatures on paper slips.

Micropayments
Retailers can't accept credit cards for low-value purchases because the cost of processing is more than the profit on the product. It's a big problem for online sales, and prevents retailers selling anything other than higher-value goods. Micropayment services allow customers to aggregate many small purchases, and settle their total bill with the provider, rather than with each retailer. Examples include Paypal and Worldpay.

Mobile phones
Most mobile network providers are launching phone-based payment services. Similar to micropayments, users can buy goods through a web-enabled phone and the cost is charged to their mobile bill.

Smartcards
Tiny chips on a smartcard now have as much processing power as a 286-based PC did 10 years ago. The smartcard can be pre-loaded with electronic cash, which is ideal for parents wanting to control children's spending. And they can store biometric identification such as fingerprints or eye scans to provide an advanced level of authentication security.