The hospitality industry has long been instrumental in moulding the public's habits when it comes to paying the bill. One of the first charge cards was the Diners Club card, which was designed for businessmen to use for travel and entertainment expenses, often in hotels and restaurants. First introduced in the 1950s, the Diners Club card gave its members up to 60 days to make payment.

Such was its popularity that banks and retailers soon took note, and the credit card as we know it began to evolve. That evolution is continuing as hotels and restaurants in the UK prepare for the biggest transformation in payment technology since electronic processing was developed in the late 1970s.

To combat fraud, the credit card industry is introducing new technology dubbed "chip and PIN". A computer chip built into the card stores security information that can be read by special terminals at cash tills. The customer types in their secret personal identification number (PIN) to pay the bill.

The problem of card fraud is serious and it is growing: last year UK banks and retailers footed a bill of more than £424m. In UK restaurants alone, card fraud totalled more than £6m in 2002, according to the Chip and Pin Programme, set up by banks and retailers to oversee the technology handover.

The restaurant industry has been a particular target of card-skimming criminals, the programme says. The scam involves a corrupt employee electronically copying the details from the magnetic strip of a genuine card and putting them on to a fake card. Restaurants are particularly vulnerable as they are one of the few places where customers lose sight of their cards when they pay, giving unscrupulous employees an opportunity to exploit both the customer and their employers.

As a minimum, restaurateurs with their own integrated point of sale equipment should allow up to 30 weeks for planning and implementing the changeover. If restaurants have a bank-owned terminal, no action is required. Banks will be providing new terminals as the technology is introduced.

Restaurants in Northampton tested the system last May, and the local McDonald's took part in the trials. "McDonald's has a very challenging environment, in that any card system must be quick to operate and have high reliability," says McDonald's project accountant Ryan Whittaker. "The trial has been useful, with no adverse customer reaction, and McDonald's looks forward to the wider use of PIN rather than the fraud-prone signature."

Sandra Quinn, communications director of the Association for Payment Clearing Services, says staff have adapted well in the trial, but training is important. "Not only are they the first point of call for any queries that customers may have about chip and PIN, but they will also have to learn how to add tips to transactions where necessary and to allow customers enough privacy to enter their PIN without feeling they are being overlooked."

On 1 January 2005 businesses that have not implemented chip and PIN will become liable for any fraud in their shops that could have been prevented by using the new technology. Quinn says customers will come to expect the security offered by chip and PIN, no matter what the size of the establishment.

Miles Quest, spokesman for the British Hospitality Association, says: "We have no statistics, but I imagine all established restaurants and hotels will go over to chip and PIN. It would be in their interest to introduce it. We've heard no antagonistic comments about it.

"Some of the smaller restaurants would think it's an extra complication for them, but in the end credit card holders will not be happy to let the card out of their sight, so consumer pressure will make them change."

The development of payment technologies will not stop with chip and PIN. Some restaurants have begun using wireless technologies for order taking, billing and payment; and as wireless networks become more affordable, businesses will be able to allow customers to complete transactions at the table.

Furthermore, mobile phones are likely to be used as a payment device in the near future, with the amount charged being added to the customer's phone bill. In 2001, London's Circus bar and restaurant started accepting payment via phone, but its supplier, Paybox, pulled out of the UK market in February last year. IT analysts expect more widespread availability from next year, as the big mobile phone companies begin to make it viable. n

State of the art - From 2005, the liability for credit card fraud will transfer to the restaurant or hotel unless chip-and-PIN technology is in use. - Wireless technologies are allowing diners to pay restaurant bills at the table. - Awkward waiting for credit card clearance can be reduced with the right software and infrastructure. - Within the next few years mobile phones could be used to pay restaurant bills.

Case study - Juboraj Group The Juboraj Group's Cardiff Lakeside restaurant conducted an evaluation of electronic point of sale (EPoS) systems with a view to improving key management processes, including stock control, financial reporting, customer loyalty and, most crucially, billing and payment capabilities. Staff in their busy, award-winning restaurants were at times finding it difficult to remember every item and include every charge on customer bills during peak hours. The instances of human error could be quite significant over the long term and lead to a substantial loss in potential profit. The Juboraj Group was already using fixed PointOne till terminals provided by HIT Solutions, but wanted to increase its speed and quality of service still further with the introduction of a mobile EpoS system. By installing HIT's Nomad EPoS-enabled hand-held devices and a wireless network the restaurant can automatically process every order in front of the customer; and because these are communicated directly to the kitchen, only orders entered into the hand-held are processed and prepared for delivery to the table. Because all customer ordering is held electronically, it also means there are fewer disputes over bills. Bills can also be split, if necessary, when there is a large party. Babru Miah, director of the Juboraj Group, says: "We are now able to boast an increased customer throughput, a direct result of the Nomad and PointOne EPoS technology. We are really excited about this new technology. The new system will help us to serve our customers faster, easier and more accurately. We hope to install the system throughout the group by the end of 2004." Mobile order-taking and bill-printing devices increase the speed of cover delivery, too. Rather than having to visit the nearest EPoS terminal to generate a bill, the waiter or waitress can wire a request from their hand-held and collect the bill when they are ready.

Case study - London Marriott Hotel Park Lane It is not just at the point of contact with the customer that investment in the right technology can help ease the payment process. Waiting for credit card authorisation can be frustrating for customers and businesses alike. It can take up to 30 seconds, adding to queues during busy check-in or checkout periods. The London Marriott Hotel Park Lane has found that with its own commutations infrastructure and secure broadband connection to the card supplier, waiting times can be cut dramatically by using PayWare Merchant, a payment-handling system from specialist technology company Trintech. Teresa Maw, the hotel's general manager, says: "We can not only improve our own operating efficiencies, we can provide our customers with a fast and flexible check-in and checkout experience." As well as reducing line-rental costs from the terminal to the bank, the system can also make reporting and reconciliation of transactions easier and help reduce errors. This is because payment information is inputted just once, as the transaction takes place, and can then be recorded and processed by the banks' own billing software. Previously, payment data would be keyed in once for the bank, then separately for the hotel's own information.