PLANS for a high-tech mobile fraud-buster are being drawn up by banks and credit card companies as they seek to combat soaring levels of card crime.

Under the plans, consumers will need to use a security device the size of a calculator each time they buy something online.

The device will work in a similar way to chip and PIN. Before making a purchase, consumers will have to insert their card in the device and type in a PIN to verify that the card belongs to them.

Barclaycard, the world’s biggest card issuer, revealed to The Times that it had completed trials of the security device. It is in talks with leading retailers to roll out the scheme nationally. Other debit and credit card providers are expected to follow suit.

The application of chip-and-PIN technology to the internet has been long-awaited. Online shopping is set to account for about 30 per cent of all retail sales by 2010. Yet the internet remains a “fraud loophole”.

Research released last week by the Association for Payment Clearing Services (Apacs), the clearing association, found that despite the introduction of chip-and-PIN technology in retail outlets the level of debit and credit card fraud soared by 20 per cent to £500 million last year.

The theft of card details to buy products over the phone, via mail order or over the internet — so-called “card-not-present” fraud — topped the table of losses, rising by 24 per cent to £150 million.

Under the Barclaycard scheme, consumers will have to enter their card’s four-digit PIN into the security device before making a purchase. After verifying the number the machine will issue a unique eight digit code that consumers have to type online. The code can be used once only.

Barclaycard said the machine will not retain any card details that could be exploited by thieves. Eventually, it is hoped that the device will be used for mail order shopping and internet banking.

Apacs said that complex negotiations between banks, credit card issuers and retailers would be required for the introduction of the new scheme. A spokesman for the association said: “There are still many questions, like: Who would provide the pocket device? Would it be free? Could you pick it up from your bank or have it sent to you in the post?”

Barclaycard suggested that the security devices would be given to its customers free. “We would not want to make it difficult for our customers to participate in the scheme,” a spokesman said.

But the scheme has already faced criticism. One argument against it is that consumers are already overloaded with mobile devices such as phones and Blackberrys and might be reluctant to carry another device.

It is also feared that consumers may find the new system hard to understand.

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