Chip and PIN technology

22 March 2004 by
Chip and PIN technology

Big changes are coming in the way you accept payments by credit and debit cards. The new system is called chip and PIN and it's due to be introduced by 2005.

What is chip and PIN?

A new technology for credit and debit card transactions. The "chip" part is a microchip on the guest's credit or debit card and the "PIN" part is a four-digit number that the guest will enter into a special terminal.

When's it coming in?

By 1 January 2005.

Chip and PIN is undergoing trials in Northampton. The trial started in May 2003 and runs until the end of July. After that it will continue in Northampton and gradually be introduced across the country.

You'll notice the first changes with your own credit and debit cards as banks are putting shorter expiry dates on new cards so you can be sent a new "chipped" card next year.

Why is it being brought in?

To combat credit card fraud, which cost retailers, banks and consumers £424m in 2002.

What are the supposed benefits?

Chip and PIN should cut the two main types of card fraud - stolen cards and counterfeit fraud. That in turn should reduce the cost of fraud to hoteliers and restaurateurs.

You'll also be protected against liability from fraudulent transactions if you upgrade your systems, as the liability for fraud will shift from 2005.

How will it affect me?

Your old payment terminals need to be changed so they can work with the new chipped cards and also take the PIN number.

What will I have to do?

If you have a payment terminal then you need to get in touch with your bank or supplier now to see whether they will replace your terminals or whether you need to buy new ones.

If you have an EFTPOS (Electronic Funds Transfer at Point Of Sale) terminal - these are used for debit cards - then you need to talk to your supplier or your EFT provider as soon as possible.

I run a restaurant. What new equipment or software am I likely to need?

You'll need to buy hand-held electronic pads and wireless printers as well as changing your terminals.

PIN terminal

This is so guests can pay their bill at the table. You'll no longer be able to take the card out of their sight.

What's all this about wireless terminals?

Wireless terminals are one way of getting the terminal to the guest and the easiest as you don't need long cables attached to the main terminal.

Where do I start?

By getting in touch with your bank or supplier - whoever the terminal came from.

Banks are writing to their customers and asking them to get in touch so they can discuss the new changes.

When should I start?

Now. Not only does the equipment need changing but staff will also need to be trained, the various legal aspects checked out, even staff contracts may need to be changed.

How much will it cost me?

That depends on whether you need to buy new terminals or whether your bank will supply them, whether you need hand-held terminals and printers, any software upgrades etc.

Are there any legal implications?

Yes. They're extremely important as there'll be a change in the liability for credit card fraud.

Lloyds TSB explains the situation like this: "The liability shift is complicated by different rules for UK-issued cards compared with those issued overseas.

"After 31 December 2004, if the hotelier has installed only a chip terminal, it will be enough to protect against fraud on other European cards.

"But he or she would need to have installed PIN to avoid liability on UK-issued cards that were PIN-capable."

Where can I get more information?

The best place to start is the official chip and PIN website:

There is also information at:

Companies supplying terminals, software and wireless terminals include:

NFS Hospitality Corporation:



Alphameric Hospitality:

I-Control Hospitality:

For specialist legal advice:

Berwin Leighton Paisner:

by Sarah Edlington

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