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APACS, the UK payments association, will trial the next generation of fraud prevention technology, designed to safeguard consumers when buying goods over the Internet, by telephone or mail order.

Fraudulent activity through these 'remote' transactions, also known as 'card-not-present' fraud, totalled £95.3 million in the first six months of 2006.

That represented nearly half of total plastic card fraud losses of £209.3 million - making it the largest single form of plastic card fraud.

The proposed solution would see banks issue the card reader to each customer.

When buying something remotely, consumers would place their card into the reader and type in their PIN.

The

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reader would then generate a one-off passcode, which would be communicated to the retailer to verify the transaction.

The scheme - developed in partnership with banks, card schemes, retailers, trade associations and systems vendors - will start to be rolled out later this year.

Robert Kenley, head of credit cards at price comparison service moneysupermarket.com, said: 'These developments are still in initial trials and it will be interesting to see who will be the first to come on board.

'If it comes to fruition, this innovation will not only protect consumers, but also revolutionise the payment card market.'

Total card fraud fell by 5 percent in the six months to end-June, according to APACS figures, and the body expects full-year figures, due out next month, to fall further.

However, card-not-present fraud rose 5 per cent in the first half of last year, with online banking fraud surging 55 per cent to £22.5 million.

One year on from the official change over to chip and PIN in the UK, almost all businesses have upgraded to the payment system.

More than 185 chip and PIN transactions take place every second, and Britain's card companies have issued 138 million chip and PIN cards - 97 per cent of those in circulation.