Chip and Pin machines

The UK is now a long way down the path of retail chip and pin technology. Uptake in all retailer sectors, from small corner shops to large supermarkets is virtually complete. When was the last time you signed for a card transaction. We are now completely comfortable with using our PIN numbers to complete transactions.

However, it wasn’t all like this. When Chip and Pin was launched on the UK public with great fanfare a few years back, the technology was immature, to say the least. It is a marvel to me how the Europeans managed to get chip and pin working so early. Most of the early chip and pin devices were simple not fit for purpose. They card readers kept breaking down, the units locked up – it was a nightmare! Many small retailers were left with no working chip and pin solution and a hefty repair bill.

Although things have improved, the chip and pin technology is far from perfect. The units themselves still wear out far to quickly. Has fraud been reduced? Undoubtedly! However, the costs saved by combating fraud are minuscule if you try comparing it to the overall cost of chip and pin roll-out. I don’t have any figures to support this, it is just a gut feel. It is the same with any financial technology. The new wave of 3D secure web transaction is the same. The costs involved are high, the technology is imperfect and flaky, but the banks, with their Victorian attitudes and stone-age appreciation of technology, combined with IT companies’ relentless tenacity to burn money makes the whole affair quite laughable – not to mention costly!

If you want a chip and pin solution there are a couple of routes to take. If you talk to your bank, you’ll be sent down the route of a stand-alone chip and pin machine. This will talk to the bank via a phone line, and require you to physically key in the amount of each transaction. Somewhat backwards I’m sure you’ll admit. These setups are usually rented, and more often than not there is a delay if things need fixing.

If you have an electronic cash register, you supplier might, if you are very lucky, be able to integrate the electronic cash register with some of this equipment, saving the tedious hassle of re-keying the amount. But don’t hold your breath.

If you’ve got a computerised EPOS retail software solution, then you are going to need a proper integrated chip and pin solution the works seamlessly with the software. Most retail solution providers do not provide their own chip and pin solution. Creating a chip and pin solution, sourcing handsets and getting the whole kit verified and accredited by a dozen different bank credit card acquirers is a full time occupation. Most retail software solution providers will integration with one of the third party companies that provide a computerised chip and pin solution.

There aren’t many of these in the UK - two examples are YesPay and Commidea. What is the meaning of "integrated" in this sense? The basic requirement is that the EPOS software sends the value of the transaction automatically to the chip and pin machine. Other information such as a transaction reference is also sent. The chip and pin unit performs the transaction with customer, and, when complete, sends a message back to the EPOS software telling it whether the transaction was successful or rejected. The EPOS software only gets the final result – no card information is ever sent to the EPOS software, much less retained. EPOS software developers rather like this arrangement, because they never have to worry about card security. Banks often bring out changes to the card security requirements – the EPOS software developers do not need this overhead, it is performed by the integrated chip and pin machine software supplier.

Usually the retailer is required to sign up for a long contract – often 4 or 5 years. They pay a monthly subscription fee for the service, and then the banks make their own charges for each transaction. The negotiation of these charges is between the retailer and the acquiring bank.

Some service offerings include the actual hardware, and others require the retailer to actually purchase the hardware. The most unreliable part of chip and pin technology is the handset itself – they are notoriously unreliable. It is recommended that you get a service which includes the hardware, and also includes a swap-out service. Some supplier is give a 24 hour swap out service for the chip and pin handset. IF you only have one till in your shop, this is a very important requirement!

Normally your retail software solution provider will look after the application for your chip and pin service – they should guide you through the process well ahead of your system go-live date. Usually it takes a minimum of a couple of weeks to get the service setup – this is largely due to the slow responses from the banks – if you need to speed the process up, nagging your bank is known to be effective!

Most integrated chip and pin solutions work by getting the transaction authorisation over an internet connection. As the small retailer, it is your job to make sure an broadband service is installed to allow this. It is also possible to get mobile chip and pin devices that work over a GPRS connection. I’ve not seen a 3G chip and pin device yet, but I am sure it is only a matter of time!

Also check out the UK Cards Association