Retailers are delaying the switch to Chip and PIN for as long as possible because of its complexity and a lack of defined benefits, according to research by Retail Logic.
Two out of three retailers will miss the January 1, 2005 deadline, when stores will start picking up the bill for fraudulent card transactions.
According to Retail Logic's survey, 25 per cent of retailers said they see no business benefit from Chip and PIN, and 9 per cent have chosen to delay the installation until their next scheduled EPoS hard-ware upgrade.
Of the 66 per cent of companies adopting Chip and PIN, slightly more than half expect to meet the deadline. Some 26 per cent will complete less than six months after the deadline, but 21 per cent do not expect to have the necessary equipment in place within 12 months of the deadline.
The research suggests that 48 per cent of all respondents will be without Chip and PIN protection in a year's time, leaving them unprotected in the face of a fraud problem that is likely to grow.
'It is likely that fraudsters will start targeting retailers that don't have Chip and PIN, placing them at increased risk of fraud,' said a spokesperson for payment trade group The Association for Payment Clearing Services.
The complexity of the Chip & PIN accreditation process and lack of guidance were cited as the top reasons for delaying the Chip and PIN implementation process.
Retailers also cited technical issues and a lack of resources for their decision to delay the switch.
Some 52 per cent of respondents estimated the cost of migration at between£100,000 and£500,000, while 18 per cent believed they would need to spend less than£100,000.
At the other end of the scale, 10 per cent of respondents thought that they would have to spend more than£1 million to become Chip & PIN compliant.
The survey quizzed 179 mainly mid-sized retailers that have between 10 and 250 stores, although some larger companies also took part in the research.
Smaller retailers usually use bank-owned terminals, which are being upgraded at the bank's expense.
According to a separate survey, 55 per cent of small retailers have already made the switch to Chip and PIN.