What is an EMV Fallback Transaction?
A fallback transaction takes place when a transaction is initiated between an EMV chip card reader and an EMV-enabled chip card, but the chip on the card cannot be read. As a result, the terminal "falls back" or relies on the magnetic stripe data in order to complete the transaction. In other words, when a chip card cannot be read by an EMV chip reader terminal, it must "fall back" to the old method of processing a card transaction, namely, swiping.
While not uncommon, fallback transactions have some risk attached to them. The data generated by the EMV chip is more secure than the magnetic stripe data; thus, relying on that data during a fallback transaction can result in an increased danger of fraud for the customer. In addition, because the Liability Shift is now in effect if the transaction is a fraudulent one, the merchant is liable, not the issuer.
What Causes a Fallback Transaction?
An EMV chip reader terminal failing to read a chip card - and thus resulting in a fallback transaction - could be connected to a number of different factors, such as:
- Damaged card or dirty/damaged card reader
- Compatibility issues between the card reader's EMV kernel and the chip card
- Incomplete EMV migration
Another, more alarming reason for a fallback to occur is fraud. With the advance of EMV and chip technology to process transactions, fraudsters are trying new tactics, such as tampering with the EMV chip so that it can not be read by the card reader, forcing a fallback transaction. Merchants should be wary in this situation and, if they sense that something is amiss, request another method of payment.