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Please note that this article is intended for educational purposes only and should not be deemed to be or used as legal, employment, or health & safety advice. For guidance or advice specific to your business, consult with a qualified professional.
We’ve created this guide covering how chip and PIN machines work to help small businesses that want to be fully equipped to take card payments. Even the most micro of businesses now need to be able to accept cashless payments because so many customers no longer carry notes and coins.
The good news is that it is both easy and cheap to take card and mobile payments, both contactless and chip and PIN. Here, you’ll find all you need to know about getting started with receiving chip + PIN payments, the benefits of being equipped to take them and what technology you need.
What are chip + PIN machines?
Chip + PIN machines are card payment devices that allow your customers to pay using a combination of their credit or debit card and PIN (personal identification number). Contactless payments are very convenient and popular, but there are circumstances where chip and PIN is necessary. They include:
- for payments over the contactless limit (which is rising to £100 in the UK in 2021)
- periodically for lower payments when card issuers ask for a PIN following numerous back-to-back contactless uses of a card to guard against fraud
- when your customer is using their card for the first time
- when a customer makes multiple contactless purchases of more than £300
A chip and PIN machine is one of the basic technologies all businesses making face-to-face sales need to be competitive, from market stall traders and food truck owners to large bricks and mortar retailers and restaurants. You don’t want your customers heading to a competitor just because they don’t have cash in their pocket.
How popular are Chip + PIN payments in the UK?
Chip and PIN has been a major payment method in the UK for many years. The first chip + PIN cards appeared in 2003. A deadline encouraging retailers to stop accepting card and signature payments was set for Valentine’s Day 2006. UK customers’ love affair with paying by card has grown stronger ever since.
COVID-19 had an impact on the amount of card payments being made. There was more reliance on cards for payments but less overall spending due to national lockdowns. More than half (52%) of all payments were made by card in 2020. Experts aren’t sure if there will be continued decline in the use of cash, but many assume there will be. Since 2017, cash payments have been dropping by around 15% each year.
Debit cards continued to be the most popular payment method in the UK in 2020, accounting for more than 2.5 times more payments than cash. Almost half of those payments were made by means other than contactless payments online payments, over the phone transactions and other ‘card not present’ payments and chip and PIN). Mobile payments (via Apple Pay, Google Pay and Samsung Pay) are also growing in popularity.
What is chip + PIN technology?
Chip and PIN is the name given to cards that have a microchip inserted into them (the small gold square on the top left of the card). Chip and PIN card machines allow you to accept payments from these types of cards. Your customer just has to insert their card into a reader and type in their four-digit PIN.
How does chip and PIN work?
Sophisticated tech identifies genuine cards and checks that the PIN entered is the same as that held within the chip. Chip and PIN cards have broadly replaced the use of signing for purchases. Signature cards meant business owners had to compare the signature on the card to the one on the receipt – which was prone to fraud.
What are the benefits of chip + PIN transactions?
- Chip and PIN transactions are very secure: Your customers need to enter the correct PIN in order for a transaction to be approved so there is much less chance of fraud than in the days of signing for purchases. In these ‘card present’ transactions you are generally not liable to cover the costs or losses if fraud does take place. ‘Card not present’ transactions have different rules.
- They’re very popular: Due to the massive popularity of card payments, if you can accept chip and PIN payments you are ensuring that you don’t have to turn cashless customers away. One of the biggest benefits is that you’re equipped to take payments from everyone who has a chip and PIN debit card or credit card. In the UK, 98% of people have a debit card. So, if you’re not equipped to take these payments, you’re missing out in many ways.
- Quick and fuss free: The majority of customers are so used to chip and PIN that accepting payments this way is generally very quick and fuss free. It means you can keep queues moving and serve the next customer without delay.
What Chip + pin machine is right for my business?
There are a range of different types of chip and PIN transaction processors with distinctive features and price points. Take a look at what’s on offer before deciding what’s right for your business.
Entry level chip and PIN device
You may just need a basic entry level chip and PIN payments processor that will enable you to take card payments easily.
You can achieve this for very little outlay – a few pounds – and match it to an app on your phone to allow customers to enter their PIN on your keypad.
Square Reader is an option that offers simplicity and is fully mobile – ideal for all environments including stalls and mobile businesses.
Portable terminal that prints receipts
You may want the flexibility and mobility of a small entry level card payments processor, but with the added functionality and professionalism of printing receipts and having a dedicated payment terminal to hand to customers. One place this may work well is in restaurants where you want waiting staff to be able to take payments at tables.
Countertop chip and PIN device
If you have a more traditional retail store arrangement with a static counter where customers will pay, you may want a countertop chip and PIN device linked to a till and more extensive point of sale system.
Chip and PIN system with dedicated customer screen
It may be important to you to have a separate screen for customers to use to enter their card details for chip and PIN payments. This can be especially important if you process a lot of chip and PIN payments – perhaps due to making a lot of sales over the contactless threshold (raised to £45 in 2020 and lifting again to £100 in 2021).
How much does a chip + PIN machine cost?
You can start receiving Chip and PIN and contactless card payments for as little as £19 with Square Reader. That’s the total cost of the card reader, which you can pair with a free point of sale app to use on your phone – be it Android or Apple. You don’t pay anything more until you make sales. Then you pay just 1.75% per transaction. That’s a total cost of £1.75 on a £100 sale. There are no monthly fees and no surprise additional charges.
To upgrade to Square Terminal, which provides a handheld device that customers can tap their PIN into and prints receipts, you pay £149 plus VAT, which you can split into six interest free payments. Again, there’s nothing further to pay until you start making sales. The fee is 1.75% on each transaction.
Square Stand turns an iPad into a point-of-sale unit. You can add a cash drawer, receipt printer and other hardware. The stand is made to sit on a counter and swivel so your customers can enter their PIN directly into the screen. It is £99 plus VAT, which can be paid in three, six or twelve interest-free payments. The only fee after that is 1.75% per transaction.
For a similar all-singing all-dancing set up, but with a separate customer-dedicated screen, you can get Square Register for 12 interest-free £50 payments or a one-off cost of £599 plus VAT.
Get started receiving chip and PIN payments
There’s really no reason not to get yourself equipped to take chip and PIN payments. Cards, particularly debit cards, are something that almost everyone in the UK now has. There’s an increasing tendency to use them to pay for goods large and small. Your business can be equipped to take chip + PIN payments with an outlay of less than £20 and you’ll never need to turn someone away for not having cash.
