EMV (Chip) Card Payments: Preventing Fallback Transactions

The introduction of EMV^® chip cards made it second nature for consumers to dip their payment cards instead of swiping them. Chip cards are more ubiquitous than ever according to recent statistics published by EMVCo, with over one billion EMV credit cards and debit cards in the United States alone.

EMV card issuance gained traction in the US due to the October 2015 liability shift, which transferred financial responsibility for fraudulent payment card transactions from card issuers to merchants. For example, if an EMV-enabled chip card is presented for payment but swiped using the magnetic stripe rather than dipped in a card reader, fraud resulting from that transaction is the merchant’s responsibility.

EMV technology helps prevent fraud by generating a dynamic token each time a chip card is dipped into a reader. These unique tokens provide extra verification and protection against fraudulent transactions. This contrasts with magnetic stripe technology, which stores static cardholder information that can be easy to compromise.

Despite all its benefits, there can be occasions when EMV technology doesn’t work the way it’s intended. In these instances, merchants may choose to “fall back” on magnetic stripe technology. Here’s more information about EMV fallback transactions and how merchants can help prevent them.

What are EMV fallback transactions?

EMV fallback transactions occur when an EMV-enabled payment card is used in a chip card reader, but the payment cannot be completed using EMV technology. In these instances, the merchant might “fall back” to processing the payment by swiping the magnetic stripe.

Do EMV fallback transactions apply to ecommerce payments?

EMV fallback transactions only apply to card-present transactions where physical cards are presented by cardholders at payment terminals. It doesn’t apply to card-not-present transactions where physical card readers aren’t used.

Why are EMV fallback transactions a problem?

A nominal amount of chip card transactions may fallback, but if the number becomes too high the card brands may assess fines and penalties. This is because magnetic stripe transactions don’t provide the fraud prevention and security protections described above.

What causes EMV fallback transactions?

There are two primary reasons for chip card transactions to fallback. First is that the chip card reader may be broken or defective. Another common reason is that the card reader may be dirty and unable to read the chip. This is particularly problematic in businesses with challenging physical environments (hair salons, restaurants, gas stations, etc.) and those with outdoor payment locations. Environmental buildup can cause chip card readers to malfunction.

How can a business prevent EMV fallback transactions?

First and foremost, make sure chip card readers are cleaned consistently. Also, keep an open line of communication with employees handling payment cards as they can help identify a higher-than-normal amount of chip card failures. This can help business owners identify broken or malfunctioning terminals quickly.

Having problems with your chip card readers? Paystri has all the tools and advice your business needs to keep EMV transactions running smoothly. Get in touch to learn more.