Is it just me, or does this seem like an incredibly stupid time to be taking on such a project?? If their banks had any hope of getting compliant, this could just finish them off.

From CNN's website

R. *********************************************************************************

Britain sets smart card plan to beat fraud

March 15, 1999 Web posted at: 11:29 a.m. EST (1629 GMT)

LONDON (Reuters) -- Britain's banking system will launch a 303 million pound ($494.8 million) plan next month to roll out over 100 million new computer chip-equipped credit and debt cards to customers in an attempt to beat card fraudsters.

From the beginning of April the members of Britain's Association for Payment Clearing Services (APACS), which includes all major bank and credit card groups, will start replacing their magnetic stripe cards with cards impregnated with computer chips known as "smart" or "chip" cards.

These cards, which use encryption techniques, are much harder to counterfeit by fraudsters who "skim" or copy a card's magnetic stripe and put it onto another card.

The banks have already started upgrading their Automatic Teller Machines (ATMs) to take the chip cards and expect to have converted 12,000 of their 24,000 ATMs to the system by mid-1999.

APACs members also aim to upgrade half of Britain's 500,000 point of sale (POS) terminals within three years.

Management consulting group OSI published its estimate on Monday of how much the program would cost and urged banks, retailers and credit card groups to adopt Cardholder Verification Method (CVM) technology.

This CVM system allows the use of personal identification numbers (PINs) at the point of sale and further reduces the prospect of credit and debit card fraud.

OSI said a full program to upgrade to chip cards would cost 303 million pounds, including 104 million pounds for 104 million cards at an extra one pound each, 24 million pounds to upgrade ATMs, 75 million pounds to upgrade POS terminals and 100 million pounds for hardware and software upgrades.

OSI estimated plastic card fraud would rise to 304 million pounds by 2002 from 122 million pounds in 1997 unless smart-card systems were introduced now.

It said smart cards would do most to stamp out counterfeit or "skimming" fraud, which was otherwise expected to jump to 100 million pounds by 2002 from 20.3 million pounds in 1997.

OSI director John Bragg told Reuters banks and retailers should move in tandem to convert to the chip-cards and could halve the fraud rate in five years if they moved quickly.

The move to chip cards is seen as generating new income for the banks and retailers, as well as stopping fraud.

Chip cards allow banks and credit card groups to incorporate loyalty programs with the cards or introduce other services like electronic ticketing and electronic purses.

The use of chip card technology had yet to take off in Britain and in some other developed countries despite being available for years.

The British card system being rolled out complies with the recently agreed EMV (Europay, Mastercard, Visa) world standard and will be the first major rollout of the system in the world.

A test of the system using 120,000 cards was carried out in July 1998 in the British cities of Northamption and Dunfermline. France uses a different type of smart card system but recently agreed to bring in the EMV standard.

($1=.6124 Pound)

Copyright 1999 Reuters. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.

-- Roland (nottelling@nowhere.com), March 17, 1999

Answers

Wednesday March 17 9:49 AM ET

Dozen Big British Finance Firms Face Y2K Shut-Down Risk By Clelia Oziel

LONDON (Reuters) - A dozen major financial firms in Britain that haven't yet met Year 2000 compliance face closure or may be forced to wind down operations, the super-watchdog Financial Services Authority (FSA) warned Wednesday.

``In the last resort and where it is apparent there is no better way to protect depositors, investors, policy holders, or the integrity of markets, we will take action to restrict a firm's business or in extreme cases to remove its authorization altogether,'' said Michael Foot, managing director of financial supervision at the FSA.

Foot told a conference on the financial sector's Year 2000 readiness that the 12 suspect firms were plucked out of a total 160 classified as ``high impact,'' whose failure to comply would have serious consequences for retail customers or the markets.

He did not unveil the firms' names due to legal constraints, but some of them were ``household names'' and others ``very widely known'' in their sectors, Foot later told a news conference.

The ``high impact'' group includes retail and investment banks, insurance companies and building societies, all of which are big players in terms of customer numbers.

The FSA, which has wide regulatory powers to police Britain's financial services sector, is also closely monitoring the millennium compliance of 350 medium impact groups, out of a total of 8,000 financial services companies which it regulates.

It allocated traffic lights -- ``red'' for non-compliant, ''amber'' for behind but likely to get on track, ``blue'' for on track -- based on the companies' self-assessment. ``Green'' would be awarded to firms that are millennium compliant, but so far no firms have been awarded that color.

According to a snapshot of figures from end-1998, 58 percent of the high impact groups were on track and 35 percent at ''amber.'' In the medium impact group, 40 percent were on track, 45 percent were at ``amber'' and 15 percent at ``red.''

The FSA had told every high and medium impact group at ''red'' of its judgement and challenged them to prove it wrong or rapidly produce a convincing solution. This could involve a number of routes including contingency planning, it said.

The same process was underway with ``amber'' groups. It was working closely with the Bank of England and industry experts.

Foot did not give a specific deadline for initiating legal action, but said this would be ``toward the end of the year.''

``As the year goes on, the time runs out,'' he said. But added: ``With over nine months to go before the millennium the conditions to justify such measures have not yet manifested themselves.''

Another risk for companies not meeting Year 2000 requirements was they could merge with or be taken over by other companies with a larger pool of resources to dedicate to millennium compliance and IT systems.

Most high-impact firms had the capital to beat the millennium bug but simply ignored the potential risks or did not see it as a serious threat to the market, Foot said. In the area of counter-party risk, implying situations where a UK company itself is compliant but can be impacted by a non-compliant counter-party in another country, the FSA said it was advising firms on any precautionary actions they can take.

But it was not in a position to force firms not to deal with companies from a specific country, Foot said.

The primary responsibility for achieving Year 200 compliance rests with the financial institutions themselves. The FSA sees Year 2000 preparedness as a major supervisory priority.

Gwynneth Flower, managing director of Britain's Action 2000 group charged with ensuring millennium compliance, told the conference she expected no material disruption in public services, but could not give a guarantee.

Flower said two in five of all businesses had yet to take appropriate action to protect itself from the millennium bug.

``The most guilty of these are those that employ less than 10 people,'' she said.

According to an independent assessment program it carried out, 46 percent of electricity and 85 percent of gas services posed no risks of material disruption. Water and telecommunications were at ``amber,'' suggesting they have agreed containment plan to rectify shortcomings.

-- rickjohn (rickjohn1@yahoo.com), March 17, 1999.