Barclays banks on smartcard readers

Barclays Bank is to give personal card readers to 10,000 of its customers in an effort to make online and telephone credit card transactions more secure.

The readers, which are about the size of a small calculator, are to be used with the new chip and Pin cards that will be issued to bank customers over the coming year.

But analysts and the industry have warned that while Chip and pin cards - the latest technology to tackle the problem of card fraud - will help confront the problem in the high street, they cannot deter, and could even make worse, the phenomenon known as card-not-present (CNP) fraud.

The growing problem of CNP fraud for both consumers and retailers rose 33 per cent this year alone.

A customer shopping online or over the phone with a personal card reader will be able to slot their Maestro debit or MasterCard credit chip and Pin card into their reader and authenticate it with their Pin.

They will then be given a one-off authorisation code to verify their transaction.

The card readers contain no personal information about the customer and do not store their bank account or card details, so if a card is lost or stolen it cannot be used to access the customer's account.

Barclays said that in future the readers could be used as extra security and verification for people who bank online.

The pilot is due to begin next February, when customers of Barclays Bank will be given the free readers.

The scheme is currently limited to debit and credit cards that use MasterCard, but if the trial is a success it will be extended to Visa credit and debit cards, said Barclays.