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How Does A Chip And PIN Machine Work?



What is a Chip & PIN machine?

A chip and PIN card machine allows a business to accept payments safely from their customers using a credit or debit card. 

Chip and PIN was first introduced in the UK in 2004 in an effort to prevent card fraud and replace the magnetic swipe method where shoppers had to physically swipe a card through the machine and then sign the receipt to complete a transaction. Retailers would then have to compare the signature against the one on the back of the card to make sure they matched. 

Not only was this a time consuming process, it also caused long queues and lacked the desired security standards sought after by both customers and merchants. For example, if a customer’s card was lost or stolen a signature could be easily forged and an act of fraud be committed. 

To combat this, the chip and PIN technology was created, making card transactions more secure, faster and more convenient. And it worked, as stats show that between 2004 and 2014 annual counterfeit card fraud losses dropped by £81.9 million. 


How to use a Chip & PIN machine

All credit cards and debit cards have a chip which securely holds a customer’s payment information inside them. 

When a customer is ready to pay, they insert their card into the chip and PIN machine and enter their unique 4-digit PIN number. 

Once this has been entered the card machine talks to the card’s chip to start the payment procedure and then send the transaction data, which is encrypted, to your merchant account, where all  payments are checked and approved by the cardholder’s bank.

Once it’s authorised, the funds are transferred to your business bank account which can take between 3 to 5 days.

Types of Chip & PIN machines

Depending on your business needs there are a number of chip and PIN machines available.

This is the most common machine you’ll  find in most shops, hair and beauty salons and independent retailers, located right next to the till and works from the countertop. As it needs to be plugged into the mains (and into your broadband / phone line) your customers can only access it from one area.​

Portable card machines are most commonly seen used inside restaurants, cafes or pubs where they bring a card machine over to the customer. Portable machines come in two parts; a chip and PIN card reader and a base. Using bluetooth, Wifi or GPRS technology the card reader connects to the base to take payments as long as it is within 50 metres of the base.

If you are a mobile business, like a caterer, courier, taxi driver or a mobile beautician, for example, then a mobile card machine is the best option. Firstly there’s no need for cables or wires and  it’s able to use the strongest mobile network (Vodafone, O2 or T Mobile) via 3G or GPRS to process payments, meaning businesses can accept card payments from anywhere in the UK where there is a signal.

  • Integrated ePOS system

EPOS stands for Electronic Point of Sale and effectively is a card machine and more! It allows businesses to accept a variety of card and digital payments, handles the calculations involved in sales and issue receipts in a frictionless manner. ePOS systems also integrate directly with credit card payment systems, keep track of stock levels and customer information and can integrate with your ecommerce website. Read more about the benefits of ePOS systems here.

For further information and details on which chip and PIN machine is right for your business click here. 


Benefits of using Chip & PIN machines


Chip and PIN machines are of great benefit for businesses of all types with the main advantages being:

  • Multiple options to accept payment

A card machine gives you multiple ways to accept payment – and for some of them, a customer needn’t even be on your premises.

  • Chip and PIN

For transactions up to £45, chip & PIN is still a faster way to accept payment than cash.

  • Contactless

Tap’n’go. The easiest, fastest and most convenient payment method. Before 2004, credit and debit cards had been used for a while but when chip and PIN was introduced consumer spending changed massively. As new cards were issued with contactless included as standard, contactless payments began to grow, especially after the transaction value raised to £30 and then £45 earlier this year in response to the COVID-19 pandemic.  Today, nearly eight in 10 people say they use contactless payments 

  • Pay by phone

Also known as a mail-order-telephone-order (MOTO), this allows you to take card payments over the phone from customers who don’t have time to pop in, or who may not be local.

  • Security 

Card machines offer you and your customers many security advantages over cash. Thankfully with chip & PIN technology, it’s likely you’ll receive payment without any disputes. Every card transaction is heavily encrypted and some card issuers use additional 3D Security – an industry standard security check that asks a card owner to confirm extra details, to reduce fraud as well as Address Verification Service (AVS), which helps to keep your business safe and secure. 

By reducing the amount of cash you may keep on site, you also reduce the chance of theft and fraud. Offering card payments also reassures customers as many people feel safer carrying cards than cash.

  • Convenience 

If you do not accept cards, it could mean your customers may take their business elsewhere. If you use a card reader, you can serve pretty much anyone that comes into your store and accept payment from anyone who has a major credit or debit card (MasterCard, Visa, Maestro and American Express). 

With there being a number of card readers available, as mentioned already, you can take payments next to your till, whilst serving customers around your premises or whilst out on the road if you have a mobile business. Research into card use also highlights that consumers spend more when they know they can pay by card. When people don’t need to worry about having enough money in their pockets, impulse buying increases. 

  • It’s quicker all-round

The process of paying by card is a lot faster when using a card machine - all the customer needs to do is insert their card and enter their PIN.  When choosing a card machine make sure it’s enabled with contactless payments, making it a lot faster for your customers to pay. They can then pay using a contactless card, Apple device or Android smartphone. Faster payments also means reduced queuing times in your premises, so you can serve more people, more quickly.



Before you purchase a card machine, consider the services you want to offer your customers and what you need to achieve with your chip and PIN device. For example:

Will you need multiple card machines?

Do you need to be able to accept payments from different locations across your premises?

Can you offer alternative payment methods, such as over the phone or via mail order?

At Opayo we have a number of chip and PIN card machines available for every type of business which will allow you to accept credit and debit cards at your premises. For more information, please visit our payment terminals page or call us now on 0800 084 1480.