NEW YORK -- Concerned about increases in fraud, the major bank card associations are considering the mandatory use of personal identification numbers for credit card purchases.

The idea, long considered impractical with credit cards, was broached in a speech last week by Alex W. Hart, president of MasterCard International Inc.

"I think we are at great risk every passing month that we don't move forward to implement [PINs]," Mr. Hart told members of the International Association of Credit Card Investigators.

He acknowledged it would take years to make PINs, used for automated teller machine withdrawals and many debit card transactions, standard with credit cards. But he said it was "crucial" to explore such a requirement to improve security at retailing sites.

Christoph Abt, a Visa International spokesman, said his association agreed that "moving to PINs is inevitable in the long term." But he added: "There is quite a lot of work to do."

Bank members of MasterCard and Visa lost more than $1 billion last year to credit card fraud. At MasterCard, losses from stolen or fake cards have almost doubled to 17 basis points of total sales in 1991, from about 9 basis points in 1989, said Philip Verdi, an executive vice president of the card group.

Visa members worldwide lost $630 million to fraud in 1991, $97 million of which was due to counterfeiting, Mr. Abt said.

The Confusion Factor

But requiring personalized code numbers will not be an easy sell. They unarguably help identify the person conducting a card transaction as the owner of the card, but they also are expensive for merchants and issuers.

And they may be confusing to customers, many of whom own multiple credit cards, debit cards, and phone-calling cards.

For those reasons, the idea of requiring PINs on credit cards up to now has never proceeded beyond the discussion stage.

The credit card associations, in fact, have spent lavishly to develop authorization systems aimed at simplifying the use of cards by consumers, merchants, and processors.

Another big obstacle to PINs has been hardware. Specialized point-of-sale terminals, called PIN pads, would be required at every merchant and service establishment that accepted a bank credit card.

The pads, mini-keyboards that scramble the numbers before sending them out for authorization, cost about $140 each.

One of the principal reasons Mr. Hart and others are now raising the possibility of the numbers is that PIN pads also are required for most merchants who accept debit cards. Both Visa and MasterCard are actively pushing new debit card networks.

|A Real Incentive'

"Given that debit cards are moving into a PIN environment, there is a real incentive to explore its value in conjunction with credit cards," Mr. Hart said in a telephone interview after the conference.

Many bankers agree.

"We can now think about PINs more and more because there are terminals at the point of sale that make it feasible," said Paul Steger, a first vice president at Comerica Inc. in Detroit.

But he went on to describe PIN requirements for credit cards as "a good idea for the future ... Like anything that requires a technological change, it's going to take time," he said.

Mr. Steger believes the most difficult part of the PIN requirement is on the consumer side.

"The challenge will be to get [cardholders] to pick their own PINs," he said.

When credit card holders use PINs today, it is mainly to draw against their credit lines at automated teller machines.

The Education Factor

Mr. Hart, too, says that consumer education will be the key. And he stressed that PIN requirements are at least four or five years away.

"There is the potential for complicating the sales process here," Mr. Hart said. "A high percentage of credit card customers have no idea what their PINs are."

Mr. Hart suggested that PINs would be required only at the point of sale, a concept that should reassure catalogue purveyors and others that rely on telephone orders charged to credit cards.

Must Be Adopted by Both

To be effective, a PIN plan also would have to be readily adopted by both major card associations, Mr. Hart said. MasterCard has had "preliminary conversations" with Visa on the issue.

Mr. Abt of Visa said his group's higher fraud protection priority is to "mandate technology to protect the magnetic stripe of a card against counterfeiters."

Visa is designing a counterfeit-proof code for the stripes that it says cannot be duplicated.

Many criminals today manufacture phony magnetic stripes.

Last week, MasterCard unveiled a "member protection program" that it says can prevent $38 million of fraud losses each year.

The plan includes upgrades in its fraud reporting and merchant audit systems as well as new programs that identify and monitor excessively high volume among merchants. It also contains a program that allows issuers to compare their risk-management performance with that of their peers.

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