Barclays today announced to introduction of chip-and-pin for online bank accounts. From late 2007, Barclays customers will begin using handheld 'PINsentry devices' when sending payments to third parties from their online bank account.

The handheld devices will be used alongside the customer’s existing debit card, and its PIN, to authenticate their identity. This extra layer of security will replace the current requirement for passcodes and memorable words at login and when making payments.

More than half a million customers will be sent free PINsentry card readers and instructions by the end of the year. The devices will be targetted at account holders who wish to set up payments to new payees. Customers who simply wish to use online banking to view their accounts and pay bills will be able to continue to use online banking as normal for the immediate future.

Barclays' Barnaby Davis said: "PINsentry is the next generation of fraud prevention technology and Barclays is proud to be the first organisation in the UK to roll it out to its customers."

A recent poll of more than 2,000 PC Advisor readers suggested that consumer confidence is robust, with 56.6 percent of respondents saying online banking is 'secure and convenient'.

However, a recent report confirms that identity theft is on the rise and online fraud is now thought to cost victims an average of £875 a year.

As a consequence, major IT security firms welcomed Barclay's introduction of online chip-and-pin.

Opinion - Do we need chip-and-pin for online banking?

Trend Micro's Raimund Genes said: "We are excited to see a major organisation like Barclays taking more responsibility and providing a safer environment for their customers to do banking."

He said that consumer confidence in e-commerce is waning and identity theft is rising.

He added: "The banking industry cannot afford the losses anymore. We also need the Government to stand up and take notice and push for E-identity to ensure proper user authentication. The middle east is way ahead of the UK and already leading this movement."