8:23am UK, Friday June 30, 2006

Chip and PIN was hailed as a breakthrough in card fraud but a Sky News investigation has shown the system may not be as secure as is claimed.

One of Britain's pre-eminent computer technology experts said banks were deliberately playing down flaws in the technology.

180 chip and pin credit card shopping

Chip and PIN cost £1.1bn to implement

Ross Anderson said: "The problem at its heart is one of liability.

"The banks have used Chip and PIN to shift responsibility onto the consumer."

There are a number of ways to get around the system, from simply looking over someone's shoulder while they are entering their number, to more sophisticated techniques such as decoding information encrypted on the card's chip.

Alex Harvie lost nearly £2,000 after her card was stolen while she was sitting in a cafe.

Her bank refused to pay the money back because the fraudster entered her PIN number correctly every time, despite the fact that Ms Harvie had never used the number herself.

Chip and PIN cost banks and retailers £1.1bn to implement and they claimed fraud has fallen by a quarter, or £65m, since its launch.

Chip and PIN spokesman Jemma Smith said customers have the same protection as ever if they are the victims of fraud.

She said: "We still have cast-iron protection for customers.

"Providing you are the innocent victim of fraud, you will still get your money back."

Alex Harvie has so far been unsuccessful in getting her bank to refund the money she lost.