ONLINE shoppers could soon be required to use "chip and pin" machines in their own homes in a bid to tackle internet fraud.

A number of High Street banks are already planning to send out millions of card-reading devices in the coming months for online customers wanting to transfer money from their account to a third party.

If successful, the system could be rolled out to cover all online transactions such as internet sales through popular e-retail websites, card issuers and payment association APACS suggested today.

Last year, online banking fraud costs UK banks £33.5 million, up 44% on figures from 2005.

To combat the rising trend, the banking community hopes that "multi-layer authentication" may prove a barrier to people trying to defraud customers over the internet.

Card reading machines the size of pocket calculators will be sent out to customers of banks and building societies - including NatWest, Barclays and Nationwide - over the months to come.

When making a bank transfer to a third party, online customers will have to insert their card into the machine and type in their PIN to identify themselves.

A randomly-generated number will then appear on the reader's display screen, which will need to be typed into the computer before a transfer can be authorised.

Hundreds of thousands of the machines will be sent to customers free of charge.