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That's definitely a thing, but you should get a prompt on the terminal to insert your card and enter your PIN, not just a straight fail.
I've never experienced that. Only Payment Declined, the same message as if you had insufficient funds. The teller then has to restart the card payment process while I try inserting it to find out if I'm due to enter my PIN or I've been the victim of fraud and I'm now penniless
Do contactless bank cards (HSBC in particular) need use with the PIN at regular intervals otherwise the contactless function stops working? I've had two cards which appear to have stopped working, I haven't used with PIN for a long time.