Home Office Minister John Denham is met UK banks on Wednesday

Banks and retailers have disputed who should foot the bill for the �1.1bn funding required for the introduction of smart cards, and have been negotiating for 10 months.

Under the proposed system, a cardholder's details will be contained in a chip and a pin number will replace a signature at the point of sale to cut down on fraud.

The use of a chip is intended to cut down on "skimming", whereby a customer's details are easily copied from a magnetic strip on the back of credit cards and then money is taken fraudulently.

Works abroad

However, the card will still contain a magnetic strip to enable transactions abroad where there may not be similar technology.

In these circumstances, a signature rather than a pin number will also be required.

The card is being developed under an agreed international standard and is aimed at cutting down fraud in America, Europe and the Far East.

Shops will benefit from the new smart cards. Their introduction would mean quicker processing and could lead to unmanned checkouts.

Co-operation

The benefits for banks, however, are much greater and the two sides will need to work together so that the cards are introduced on time.

Retailers are demanding compensation from the banks to cover their share of the �1.1bn bill. This is estimated at between �300m and �350m.

Most retailers want a reduction in fees to cover their costs over the next few years.

The level of compensation must be agreed between retailers and individual banks.