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What is a chip and pin machine? A guide for small businesses

What is meant by the term ‘chip and pin’, and how does a chip and pin machine work?

A chip and pin machine is the same thing as a credit card reader. In fact, the two terms are used pretty interchangeably. The device provides a secure way for your customers to pay for your products using a credit or debit card. 

Chip and pin machines replaced the old swipe and sign system way back in 2006. The introduction of chip and pin machines had a significant impact on reducing fraudulent transactions, with the UK Cards Association reporting a reduction of £18.9m in fraudulent transactions between 2004 and 2014. 

Card payments are now the most popular way for customers to pay in the UK. This transition has been aided by the convenience of the chip and pin payment method, and the evolution of contactless card payments. 

There are two recognised types of chip and pin machine – fixed, and portable. Business owners often associate the term ‘chip and pin’ with a fixed card machine, but portable card machines use exactly the same technology. 

In this article, we’ll explain the key differences between fixed and mobile chip and pin machines, and clue you in about how they work behind the scenes. 

If you’d like more information on chip and pin machine providers, head on over to our best card machines page for a full breakdown of a variety of devices.



What is a chip and pin machine and how does it work?

A chip and pin machine is a device that enables customers to securely pay by credit or debit card. During the coronavirus pandemic, the amount you can pay by contactless payment method increased to £45, so pin entry is only required on payments that exceed £45. 

We explain how a chip and pin machine works in the video below:


A chip and pin machine works by communicating with the chip on your customer’s credit or debit card. When the pin number stored on the chip matches the number entered on the chip and pin device, the chip and pin machine sends the transaction data to your merchant account to be processed. 

Your merchant account is a holding place for the transaction while it’s being processed. You can find out more about what a merchant account is and how it works on our what is a merchant account page.


Countertop vs mobile chip and pin machines

While the term ‘chip and pin machine’ is used interchangeably with other card reader terms, more often than not, when people think of a chip and pin machine, they think of the device on the right.chip and pin machine

The chip and pin machine pictured on the right is a countertop machine, which means it has a base station that plugs into the mains for power and a local network for internet connection. 

The other type of chip and pin machine is a mobile chip and pin machine. But what makes a mobile one different from a countertop one? 

A mobile chip and pin machine works using a 3G or 4G connection, making it ideal for field events and festivals. The chip and pin function may work differently, too. 

Square chip and pin machine

Let’s take a look at the Square chip and pin machine as an example. Featured on the left, the Square chip and pin machine works in combination with payment software and a phone or tablet to provide businesses with a secure way to take payments. 

To take a chip and pin payment using the Square card reader, a customer slots their card in, then types their pin number into the number pad that appears on the screen of the device connected to the card reader. 

Mobile and countertop chip and pin machines are suitable for different types of businesses. Take a look at the summary table below to find out which type of chip and pin machine is most suited to your type of enterprise.

Countertop PDQ machineMobile PDQ machine
Often provided by acquiring banks (dedicated merchant account providers)Often provided by payment facilitators (aggregate merchant account providers)
Charged the same amount each month
Charged a small fee each transaction
Plugs directly into broadband router or phone lineUses 3G, 4G, or wifi connection
Built-in receipt printer included with some devicesA basic device that tends to come alongside payment software
Suitable for shops, salons, and businesses with fixed sales countersGreat for food trucks, market stalls, and travelling businesses

How to find the right chip and pin machine

There’s a fair amount to think about when choosing the right chip and pin machine for your business. 

Fixed chip and pin machines are typically associated with merchant accounts provided by banks. Banks tend to offer rates that are favourable to businesses that have high volume, high value sales figures, which means countertop chip and pin machines are usually suited to larger businesses. 

Mobile chip and pin devices are typically associated with payment facilitators, such as Square and Zettle by PayPal. Payment facilitator rates are more suited to smaller businesses with lower volume, lower value sales figures. As a result, mobile card readers are often used by small businesses. 

If you need a bit more direction with choosing the right chip and pin machine for your business, Startups.co.uk is here to help. Our team of payment experts have put together a quick questionnaire that will guide you to the providers that are best suited to your needs. Why not check it out?


Aimee Bradshaw
Aimee Bradshaw

Senior Writer and Researcher

Aimee is Startups' resident expert in business tech, products, and services. She loves a great story and enjoys chatting to the startups and small business community. Starting her own egg delivery business from the age of 12, she has a healthy respect for self-starters and local services.

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