The new system replaces a signature with a personal identification number (Pin) when purchasing goods.

Shoppers in the Midlands market town are the first in the UK to try out the scheme. However, French retailers have started operating a Pin system and it will be rolled out across the country if successful, possibly as early as 2005. A publicity campaign is already in the planning stages.

The ‘Chip and Pin’ system has been shown to cut fraud. It uses computer chips embedded in the plastic cards and is widely believed to be far more secure than signatures.

Credit card fraud is responsible for almost £450 million of crime a year.

About 1,000 businesses in Northampton such as Marks & Spencer, Woolworths and Tesco will display keypads and customers tap in a four-digit pin when making a purchase.

To expand the system across the UK, more than 100 million debit, credit and charge cards will need to be upgraded.

The new system should almost eliminate the practice of credit card duplication, known as skimming, as the new cards would be much harder to copy.

Rivals Visa and MasterCard both back the scheme.

Colin Grannell, managing director of Visa UK, commented, ‘We recognise that the move to chip and Pin is a major investment, which is why Visa set up an incentive fund of £100m to help retailers, vendors and banks get started. Verification of the cardholder by chip and Pin will become a reality for the majority of UK cardholders in the next two years.’