Cash isn’t king. It hasn’t dominated transactions in the UK for many years, having been usurped by credit cards and debit cards. These days phones, watches, apps and devices are more likely to feature in payments.
To give you an idea of how big a part of our daily lives card payments make up, consider these figures. Around 1.7 billion debit and credit card transactions were made by UK cardholders in January 2022, almost 10% more than in January 2020. Of these, contactless payments accounted for approaching 1.2 billion transactions.
Card payment machines, card readers, Chip and PIN readers, PDQs or plain old card terminals – call them what you will – are pretty much everywhere, so it makes sense to know what one is.
By ‘card terminal’ we don’t mean ATMs, which is mainly used to make cash withdrawals. Instead, we mean the devices used to pay for something, typically by your debit or credit card. This can be a device that’s fixed in place on or near to the till, a portable device, which uses Bluetooth technology, or even a mobile phone with a reader app installed.
Aside from contactless payments, you can also enter your four-digit PIN code on the reader’s keypad. Indeed, this is a must if you’ve asked for cashback or you purchase costs more than £100 - although some phones and other devices will let you pay more wirelessly if you authenticate the transaction.
Most retailers, restaurants and other goods and service providers now take card payments via card machines. For the retailer it’s safe and secure, as they have an audit trail of what money they’ve taken, plus they don’t have to work with so much cash on site.
For customers, it’s also convenient as queue times are shorter. Handheld payment readers have proved a big hit in restaurants, on airplanes and at sports or leisure venues. Basically, anywhere you might not want to get out of your seat to pay.
Fixed, counter-top devices have been a mainstay of supermarkets, stores and petrol stations for years and it was their take-up that encouraged the rest of us to trust the technology.
More and more, card readers are being employed in those areas where cash has continued to be used, such as vending machines, gym and sports centre lockers, public transport and parking meters.
Even pop-up stalls, street traders and Big Issue sellers are now sometimes equipped with the devices - in fact the technology is versatile and easy enough to apply to all manner of applications that it’s hard to imagine where it won’t work.
Card terminals are linked to a bank account - that's something that's pretty non-negotiable.
After that, your options are considerable.
For £30 you can pick up a small hand-held terminal that works with an app on your phone to accept payments, you'll lose a percentage of every sale (1.75% with Zettle or 1.6% with Barclays, for example), but there are no other ongoing costs and you're not tied in to a contract.
Some business accounts even come with a free payment terminal included - although this is generally only useful for smaller businesses, as it tends to be the most basic options.
From there, providers let you run all the way up to larger terminals you can rent on a monthly basis with variable charges - much like a mobile phone contract - to entire payment systems including configurable tills, accounting software, online payments, receipt printing and more.
Using a card payment machine couldn’t be simpler. This four-step process explains what happens at the point of sale:
You hand your purchase to the shop staff or scan it at self-service till or point of sale.
The amount due flashes up on the screen.
You present your card to the card reader to be scanned for the PIN to be typed.
You press enter to confirm the transaction, wait for a receipt to print, if you’ve requested one, and you’re done.
Our four-step process covers what we experience at the checkout. But there’s a lot going on behind the scenes. Here’s a breakdown of the process in a little more detail:
When you present your card, its chip sends the transaction details to the retailer’s merchant bank account. This sits aside from their business bank account and holds funds while the payment process trundles on.
The merchant bank sends the payment request via broadband or a phone line to the customer’s card provider – usually Visa, Mastercard or American Express.
The card provider transmits a request for payment authorisation to the customer’s bank or credit card provider.
At this point one of two things typically happens:
The transaction goes through if the card details are all correct and if there’s enough money in the account.
The payment’s rejected because the card details aren’t correct or the customer doesn’t have enough money to cover the transaction. In this case the card’s either held by the retailer – if the merchant bank receives a message saying the card’s been fraudulently used or it’s returned.
Note: It’s also possible that your transaction may be voided due to a break in the internet connection or another program failing. In this case you may be asked to start the payment process over again. On the odd occasion, your card provider may request a PIN to check you are the legitimate cardholder.
Unlike with an ATM withdrawal, payments can take longer to be processed by your card provider.
Depending on the time of the day, and whether it occurred at a weekend or on a bank holiday, it can take up to three days for the payment to appeal on your account.
Card payments are extremely safe. They’re certainly safer than carrying around wads of cash. But concerns about theft or loss aside, the technology’s very secure.
When your card’s presented all payment details are encrypted to ensure only the key points in the transaction chain have access. This’ll be the retailer, your card provider and your account or credit card company.
It’s reasonable to wonder what happens if your card is lost or stolen and fraudulently used.
The first thing to do if you realise your card is missing is to freeze it on your banking app if possible, and if not call to cancel it. If the card's used while it's frozen or after you've cancelled it, you're in an incredibly strong position to ask for that cash to be refunded from your bank.
On top of that, the rules governing card payments, contactless or not, should protect you, in other ways too.
For a start, although you can make numerous card transaction in any one day, the card provider uses algorithms to spy suspicious activity. For example, if a card’s consistently used to make purchases that are close to the £100 individual transaction limit, such as on alcohol, it’ll be flagged up as doubtful and the card blocked.
Card providers take fraud seriously, after all. They’re obliged by regulation to refund you for any losses unless they can prove you’ve acted recklessly or fraudulently – and so are incentivised
That's why it's important to register your card as missing or freeze it - although you have some leeway here. While you could be denied refunds for being 'reckless', this would need to be something as irresponsible as writing your PIN on the card for banks to wriggle out of their responsibilities.