The first Chip & PIN pilot scheme took place in the town of Northampton, after initial trials the service rolled nationally in the United Kingdom on February 14th 2006.

Before the introduction of Chip & PIN every credit or debit card transaction performed by a consumer face to face with a merchant used a magnetic stripe or mechanical imprint to read and record the card holders account information, a signature was used for verification. Under this system, the customer handed their payment card to the cashier at the point of sale, who either swiped the card through a magnetic reader or makes an imprint from the raised numbers/text of the card. In the former case, the account details are verified and a slip for the customer to sign is printed. In the case of a mechanical imprint, the transaction details are filled in and the customer signs the imprinted slip. In either case, the cashier verifies that the signature matches that on the back of the card authenticating the transaction.

In some countries, such as Greece, Spain or Italy, the credit card owner usually must give to the cashier their national identity card (id cards) issued by the police, and if the name on the credit card does not match that on the identity card (or if no identity card is available) then the transaction cannot continue. Many people in the UK believe that the introduction of Chip & PIN is the first step towards a national identity card.

This old system before the introduction of Chip & PIN proved reasonably effective, but had a number of security flaws, including the ability to steal a card in the post, or to learn to forge the signature on the card. Additionally technology had become available on the black market for both reading and writing the magnetic stripes, allowing cards to be easily cloned and used without the owner’s knowledge.