Chip and PIN has often been considered a bullet proof solution for securing transactions which did cause fraud rate to fall initially. In a research report by Experts at Cambridge University there is a fatal flaw in the chip and PIN technology that is supposed to guarantee the security of millions of credit and debit cards.

The scientists claims the loophole means stolen cards can be used in shop terminals and bank cash machines without being identified. In theory, thieves would be able to make purchases and cash withdrawals without requirement of four digits PIN.

In Feb 2006 the chip and PIN system became universal replacing the use of signatures to authorize purchases for transactions using plastic money. Professor Ross Anderson, from the Cambridge University Computer Lab, claims the banks may now need to rewrite the security software around the entire chip and PIN system in order to make it fully secure as he believes he has found a number of ways in which the secure system can be breached.

The secured system flaw can be used through a small circuit board containing a computer chip and transmitter can be attached to the chip on the plastic card and concealed up the sleeve.

This communicates with a computer stored in a backpack worn by the criminal when using the card at a till or cash machine and when the user is asked for the four digits PIN to authorize the transaction they only need to enter any random code.