Tesco is gearing itself up to handle smart cards with a pilot scheme at a number of its stores in Hertfordshire.
With card fraud costing individuals and banks around £430m a year, smart cards are currently seen as the best way to cut crime.
The supermarket chain now plans to install integrated smart card and Pin code software developed by Retail Logic into its electronic point of sale equipment.
Tesco's tills will still be able to handle cards with conventional magnetic stripes. But the new software will allow Tesco to download the information contained on the smart card chips and prepare it for the next security feature.
This is a device into which a card is inserted, then handed to a customer who will input their Pin.
The Tesco mini-trial pre-empts the first major trial using smart cards with activated chip and Pin devices which will be run by a combination of major banks and retailers next spring in Northampton.
Nick Mourant, divisional director of treasury at Tesco, said in a statement that the company is future proofing its payment card processing systems.
The move will help Tesco deal with the change in culpability for card fraud due to be implemented on 1 January 2005.
Liability for fraud will shift from the card issuer to the outlet that has the least protection.
If retailers don't have the ability to use the Pin devices and record the chips, they will be liable for any fraudulent transaction to which they are party.
Jemma Smith, a spokeswoman for the Association for Payment Clearing Services, told vnunet.com that most major retailers are expected to introduce Pin and smart chip activation by 2005.
"The aim is to stop a lot of the card fraud such as 'skimming' which is prevalent in places such as restaurants," she said.
"The criminals won't be able to download the information contained on the smart card or be able to input the Pin. If a retailer hasn't implemented the security, they and not the card issuer will be liable for the fraud."
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