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Until the introduction of Chip and PIN, all face-to-face credit or debit card transactions used a magnetic stripe and signature for verification. Under this system, the customer hands their card to the assistant at the point of sale, who "swipes" the card through a magnetic reader; the cash register then verifies the card details and prints a slip for the customer to sign. The assistant then verifies that the signature matches that on the back of the card, and authenticates the transaction.
This system has proved reasonably effective, but has a number of security flaws, including the ability to steal a card in the post, or to learn to forge the signature on the card. More recently, technology has become available on the black market for both reading and writing the magnetic stripes, allowing cards to be easily cloned and used without the owner's knowledge.
To solve this, banks and retailers are replacing traditional magnetic stripe equipment with that based around smartcards, which contain an embedded microchip and are authenticated automatically using a PIN. When a customer wishes to pay for goods using this system, the card is placed into a "PIN pad" (often by the customer themselves) which accesses the chip on the card. Once the card has been verified as authentic, the customer enters a 4-digit PIN, which is checked against the value stored on the card; if the two match, the transaction will be automatically completed.
Note that "card not present" transactions such as InternetThis article is about the Internet the extensive, worldwide computer network available to the public. An internet is a more general term for a set of interconnected computer networks that are connected by internetworking''. WWW information network structu, telephoneThe telephone or phone is a telecommunications device that transmits speech by means of electric signals. Generally attributed to the inventor Alexander Graham Bell, the first was built in Boston, Massachusetts, in 1876. However, an Italian inventor Anton or mail orderMail order is a term which describes the buying of goods or services by mail delivery. See also mail order bride External link . purchases are not affected by the introduction of the Chip and PIN system. Since these are also major areas of fraud, other initiatives are being developed to improve security in these situations, such as additional security codes printed on the back of the card and more complex authentication services.