The differences between traditional chip and PIN card terminals and newer mobile app-based card readers
For any business or charity, making the decision to incorporate card transactions into your accepted payment methods is an important step in scaling your operation.
As many people now no longer carry large amounts of cash, accepting card transactions can open you up to a wider customer base.
But, with so many options available on the market, which card payment solution is best for your business or charity?
To help you with your decisions, we’ve broken down the differences between traditional chip and PIN card terminals and newer mobile app-based card readers. While both types of terminal can process chip and PIN transactions, their capabilities can vary.
The chip and PIN system was introduced in 2004 and can process transactions from both credit and debit cards.
The ‘chip’ in ‘chip and PIN’ refers to the small rectangular microchip embedded in credit and debit cards. This chip contains data that is read by the card terminal to take payment from the customer’s bank account. It is highly secure and also holds data that allows the chip itself to be verified by the terminal and the card issuer during a transaction.
PIN stands for Personal Identification Number and is the unique 4-digit code customers key in on a card machine to authorise a sale. The PIN prevents people other than the card owner from making payments with a credit or debit card.
A chip and PIN payment is only processed when the customer inserts their credit or debit card into the terminal and enters their unique 4-digit PIN.
Since the arrival of contactless payments in 2007, and their subsequent rise in popularity, many establishments have updated their chip and PIN terminals to incorporate contactless payment capabilities.
Meaning that, if a transaction is under £30, the customer can simply tap their card on the screen of the terminal to complete the payment, without the need for entering a PIN. All new installations have to be able to support contactless transactions.
Chip and PIN card terminals
Chip and PIN terminals are the original card machines. They usually take the form of a countertop machine featuring a small screen, keypad, somewhere to swipe a card and a place to insert the card; often at the bottom below the keypad, and often have a built-in printer. More modern devices may also feature a touchscreen.
These are the sorts of machines you’ll be used to using when you pay in a supermarket or high street store. Some terminals may be linked to, or even integrated into, the store’s POS system (the ‘till’) and share some of the POS’s features, such as the printer.
The original terminals used a normal phone line to dial out for authorisations, and these ‘dial-up’ terminals are still available and applicable in many low-volume situations. Terminals are also now available that connect to the internet via a network connection.
Some terminals, particularly in restaurants, may have an internet-connected base station, where the removable terminal connects to the base station using Bluetooth. This means the terminal can be easily taken to tables for payment; these are usually referred to as portable terminals.
For even more freedom of movement, mobile terminals might connect to a mobile data service using an internal SIM, or by using Wi-fi.
The traditional terminals tend to be bulkier than the App-based devices, but are generally simpler to operate. They also tend to be quite robust.
They are easily recognisable by cardholders who might otherwise baulk at using a mobile phone to handle their card details.
The inclusion of a printer means that a hardcopy record of the payment can be produced quickly and easily without the need to capture additional information.
Mobile App-based card readers
App-based card readers are small, mobile-connected terminals usually not much bigger than a credit or debit card themselves. To process a payment, they link to a mobile device running an App, either physically or via Bluetooth, such as a smartphone or tablet.
The vendor will use the App on their mobile device to input the transaction details and the customer will either insert their debit or credit card into the reader and enter their PIN or, for card transactions under £30, tap their card on the reader to complete the sale.
These small handheld readers work in the same way as chip and PIN terminals but are smaller and more lightweight. By using the App they do not need a full-sized keyboard or printer.
These types of card readers have risen in popularity in recent years, especially with small start-up businesses as they are compact and cheap to purchase, with no monthly rental charges (although they can be subject to hefty transaction fees).
They can be simple to use, although using the App to enter the transaction details whilst also handling the separate Bluetooth card reader, can be cumbersome in some situations
As they need to be connected to a mobile phone or tablet, and many are platform-specific (e.g. if the card reader is tailored for Apple, you’d only be able to process payments with an iPhone or iPad).
This means that, if you didn’t have the required mobile device, you’d need to purchase this before being able to use the card reader, adding an extra cost to your business.
The main advantage of using an App is that often these can be set to automatically repeat transactions for the same amount. So, if used for contactless donations, the device can easily be used as an ‘electronic collection tin’.
Some devices are self-contained and only accept contactless transactions. However, it needs to be remembered that contactless cards are subject to certain limits and it could cause problems if a chip and PIN transaction is required because a limit has been reached.
Only donations and transit (e.g. bus or train fare) payments are not subject to these limits so these types of reader are not suitable for general retail.
Which option is best for your business or charity?
App-based card readers have become increasingly popular with small businesses and startups, especially those which operate a mobile business.
For low-volume, low-value scenarios they are ideal with low start-up costs and no monthly fees. But, their slower speed of operation and higher transaction costs mean they are not as suitable as volumes and values increase.
For larger operations, or businesses or charities who regularly accept card payments, especially where speed of operation is a requirement and/or high values are involved, traditional chip and PIN terminals are the preferred option. These terminals include:
Countertop machines – where the machine sits on a counter connected by wires to a broadband or phone line port.
These machines are ideal for businesses or charities with a fixed location who serve customers at a till point.
Portable machines – where the machine sits in a cradle or base unit and can be picked up and used up to approximately 50 metres away from the base unit. The base unit is connected to an internet or phone line and charges the portable terminal and establishes a connection through Bluetooth or WiFi.
Portable terminals are ideal for businesses with a fixed location who accept payments from around the premises such as restaurants and bars.
Mobile machines – a self-contained portable chip and PIN machine which uses mobile internet or Wi-fi connections to complete transactions. These machines are ideal for businesses and charities who operate at a variety of locations or events. Mobile food vans, pop-up shops and market stalls as well as charities canvassing for donations in different areas can all benefit from a mobile chip and PIN terminal.
To find the right payment processing solution for your business or charity, speak to RSM 2000 today and find out what we can do for your business.