EMV (Europay, Mastercard, Visa) technology is designed to enhance card security. They are small, square computer chips that you see now on nearly every debit, credit and prepaid card. EMV chips are more secure than “swiping” a magnetic strip because of the way the data is transferred through the terminal.
In every instance of an EMV transaction, a unique string of numbers and letters (a “token”) is created, with debit transactions accompanied by a prompt for the cardholder’s PIN (personal identification number). This prevents the theft of the cardholder’s banking information unlike a magnetic strip, which shares non-tokenized data and requires a signature.
In certain situations where an EMV chip cannot be read by the terminal, a merchant might “fall back” to using the magnetic strip and instead swipe the card.
Fallback is defined as transactions that…
- Are performed using an EMV-chipped card
- Are used at a terminal that is indicating that it is capable of reading the EMV Chip, and
- You are unable to process the payment using the EMV technology, so
- You “fall back” to processing the payment by magnetic stripe (an old technology), rather than the EMV chip.
Transactions that are manually entered are not considered fallback
The Common Reasons for Fallback
- Inoperative or malfunctioning chip reader
- Settings in the software for the terminal are overriding prompts for EMV
- Out of date software in the terminal
- A malfunctioning chip in a credit card
- A Fraudulent Credit Card
The Impact of Fallback on your Business
As a merchant, the card brands expect you to adopt best security practices for card transactions. By failing to accept EMV, your business becomes more vulnerable to the following:
- Increased Fraud Risk. Magnetic stripe transactions are more susceptible to fraud compared to EMV transactions
- Chargeback Liability. You are 100% liable for chargebacks if you do not adopt EMV. Additionally, fallback transactions may have higher chargeback rates because of the reduced security measures used.
- Card Brand fines for excessive fallbacks, and the chance of disqualification from accepting certain card brands.
- Stay up to date with firmware and software updates. Ensure your card readers are regularly maintained and updated with the latest manufacturer updates for security and functionality.
- Staff Training. Train your staff to guide customers through fallback situations and encourage chip usage
- Terminal Upgrades. Consider upgrading to the latest EMV-compliant terminals.
If you are having difficulties processing EMV transactions on your EMV-equipped terminal, or you would like to discuss upgrading to a terminal that features EMV, please contact our support team at [email protected], or at (866) 701-4700.