A new payments system due to be introduced next year to combat credit card fraud could also hit many businesses in the pocket, warns ACCA (the Association of Chartered Certified Accountants).

The new system, dubbed "Chip and PIN", will mean that signatures are replaced with a four-digit pin number. When paying, customers will type in their individual pin numbers on a number pad at the till.

The "hacker proof" technology will then compare it with the PIN which is stored on a microchip embedded in the card.

But from January 1, 2005, a change in card issuers' rules will mean that retailers become liable for losses where a Chip and PIN card is used fraudulently at a terminal that is not Chip and PIN-enabled.

Jonathan Beckerlegge, senior partner of CGA Accountancy of Micklegate, York, and ACCA spokesman for the north east, said: "It is vital that all businesses which accept credit and debit cards understand the implications of this liability shift. If businesses have complied with card issuers' instructions and cardholders have been successfully authenticated, then retailers will not be liable if a transaction is later found to be fraudulent.

However, those retailers who choose not to adopt the Chip and PIN system will be held responsible and, as a result, are likely to become the focus of attention of credit card fraudsters."

Payments made using a credit or debit card when the cardholder is not present are not affected by Chip and PIN and therefore are exempt from the liability shift.

Updated: 11:28 Friday, April 02, 2004