A team of computer researchers said they had uncovered flaws in the Chip and Pin system which are being exploited by fraudsters to use stolen cards.
The research group in the Britain found that criminals can insert a "wedge" between the stolen card and terminal, tricking it into believing the pin was correctly verified, when in fact any pin can be used for the transaction.
The card meanwhile thinks it was authorised by signature.
"We have tested this attack against cards issued by most major banks. All have been found to be vulnerable," a research spokesman said.
The discovery is likely to place some question marks over the existing Chip and Pin design.
Victims of this type of fraud may encounter problems obtaining refunds from their banks as the receipt produced states "Verified by Pin".
"Over the past five years, thousands of cardholders have had stolen Chip and Pin cards used by criminals. The banks often tell customers that their pin was used and so it's their fault," the spokesman said.