Chip and PIN is the name for the process of paying by credit or debit card through a card payment terminal (also known as a PDQ machine). First introduced to the UK in 2006, it is the most common type of technology used to take card payments – with almost 4 in every £5 of spending at UK retailers is now made through credit and debit cards, as reported by the UK Cards Association.
Prior to Chip & PIN technology, businesses would use a card terminal with a magnetic swipe. This processed transactions much slower as customers would need to physically sign to verify any transaction. The magnetic swipe method couldn’t provide the same level of security we see today, as customer cards could be easily lost or stolen, with only a fake signature needed to process a payment. To help combat this, Chip and PIN technology was introduced. Designed to make card transactions more secure, annual counterfeit card fraud losses decreased by £81.9 million between 2004 and 2014 according to the UK Cards Association. It became mandatory for all debit and credit card payments from February 2006, replacing the magnetic swipe method in the UK.
Today, card payments have never been more popular, and much of this can be linked to the popularity of Chip and PIN. Since 2006, card payments have gradually started to replace cash as we move more towards becoming a cashless society. According to an article by The Guardian, 62% of all payments in the UK were made using cash in 2006, however 10 years later the proportion had fallen to 40%. It was also reported that card payments had overtaken cash payments as the UK’s number one payment method.
If you’ve ever made a payment in the UK using a credit or debit card, you will most likely have used Chip & PIN technology to do this but you may not have thought about how it works. As a business owner, we thought it’d be useful to go through a basic step-by-step to give you an idea of how it works:
1. When a customer is ready to make a payment and it is not contactless, they insert their debit or credit card into the Chip & PIN card machine. To ensure the transaction is secure, the customer will be asked to enter the 4-digit PIN code that their bank would have provided them with. This PIN is the same code that is stored on the chip of the card which verifies that the transaction can be processed.
2. After the correct PIN has been entered, the chip on the customers card will interact with the machine. This sends the encrypted transaction data to the businesses merchant accountwhere the acquiring bank will ask the credit or debit card provider to get authorisation from the customers bank.
3. The credit or debit card provider will verify that the customers card details are correct and send an authorisation request to the customers bank. This means that they can check the customer details and confirm that they have enough money in their account to make the requested payment.
4. Once authorised, the payment will be sent from the customers bank into your business bank account, which can take up to 3-5 days.
There are different types of Chip & PIN terminals available to suit a variety of businesses and industries – whether you need to take payments from your counter, around the shop floor or if you’re out on the road.
Countertop Chip and PIN machines – ideal for businesses who want to take payments from a fixed location in their business premise. The terminal uses a cable and will need to be plugged into an electrical socket. It can be connected to either your phone line or to your broadband networking using an Ethernet cable. The countertop machine is an ideal solution for businesses who do all their transactions at a till or countertop such as corner shops, high street stores and independent retailers.
Portable Chip & PIN machines – the name is a giveaway. The handset connects to the base unit using Bluetooth, allowing you to take payments up to 50m away from the base. The terminal comes with a base unit which can be plugged in at your counter for charging. It’s really useful if you’d like to make payments more convenient for your customers as it lets you take the card machine directly to them, instead of them needing to queue at a till for payment. This solution is perfect for bars, pubs, cafes and restaurants.
Mobile Chip and PIN card machine – you’ll be able to accept payments anywhere with a strong mobile connection in the UK, the terminal is GPRS-enabled and uses a built-in SIM card to connect to the strongest mobile network available to process transactions. It comes with a base unit to charge the handset, which can be connected to a plug socket. It can also be connected to a micro USB cable if you need to charge the reader inside your vehicle. Once you’re done taking payments, you can leave the machine on charge overnight, ready for when you next need it. Brilliant for taxi drivers, handymen, markets, pop-up stands and more.
The cost of a Chip & PIN machine can vary depending on which card provider you choose. At Payzone, we don’t believe in a one size fits all approach which is why we provide bespoke pricing packages to our customers. The actual cost of the machine itself is then included in your individual pricing package. One of our card payment specialists can come to visit you face to face to learn more about you and your business, they’ll help you choose the best card machine for your business and create a bespoke pricing package. When you join Payzone, there are no setup fees and no exit fees if you choose to leave at the end of your contract.