Researchers at at Cambridge University have found a flaw in the chip and pin system that makes the secure payment method massively insecure.
The boffins can trick the system into thinking the correct pin number has been entered by simply using a second reader to send a 'pin okay' signal to the shop terminal.
"Chip and PIN is fundamentally broken," Professor Ross Anderson of Cambridge University.
"We think this is one of the biggest flaws that we've uncovered - that has ever been uncovered - against payment systems, and I've been in this business for 25 years," he spluttered.
The researchers called the scam "man in the middle" and decline to be too specific on how the fraud could work. Their report is in a pdf here.
"Essentially what it does is to exploit a flaw in the chip and pin system," Saar Drimer, one of the Cambridge boffins, said. "It makes the terminal think the correct pin has been entered, and the card think the transaction was authorised with a signature. At the end the receipt says 'verified by pin' so the bank is going to think the pin is entered directly, but the criminal actually did not know the pin."
The Cambridge team has previously found other weaknesses in the chip and pin system, which was brought in in 2004 to cut retail card fraud.
"The first thing that banks should do is fix this vulnerability," a spokesman for the group said.