Fallbacks Are Making a Comeback

Monday, March 07, 2016

It’s usually good to have a backup plan. This applies to payment processing as well—something to fall
back on in the event a credit card or terminal doesn’t work properly during a transaction.

In the industry, when you need to find an alternative way to process a payment, the term used is
“fallback.” While not a new trend—for example, manually keying in a card number when the
magstripe doesn’t work—EMV has pushed fallbacks to the forefront again, making them a more
common occurrence.

A fallback transaction occurs when a chip-enabled card cannot be processed by an EMV-ready
terminal. The result: The cashier is forced to use the traditional card swipe method to capture the
transaction—falling back to an older process.

Keeping up with security technology standards can also be a pain point for merchants—expensive
equipment upgrades, compliance issues and more—not to mention the resurgence of fallback
transactions. And EMV implementation has been a disruptive technology, driving an increase in

With the slow adoption of EMV in the U.S., merchants are still accepting magstripe cards—and that
won’t change any time soon. But there are a few perils that can impact business owners in this
scenario, given the October 2015 liability shift. Because fallback transactions are less secure, a
business could be at risk for covering chargebacks, receiving fines from the card brands and penalties
imposed by the government.


Identifying a Fallback

Legitimate Fallback

Not all fallbacks are related to fraud. They can occur for valid reasons such as a damaged chip, a dirty card reader or staff untrained on processing a chip card correctly. Although these situations are not fraudulent, swiping an EMV-enabled card could result in chargebacks.

Fraudulent Fallback

Criminals are hard at work getting around the security that EMV provides. They’re creating counterfeit cards with intentionally damaged chips to force a fallback. Damaged chips are a big red flag. It’s a tough situation: You don’t want to lose the sale, but when you bypass the proper EMV procedure, you open your business up to a chargeback.

Fallback Monitoring

Unlike chargebacks, your merchant statement doesn’t track fallbacks. However, your issuer can check trends for you to see if you’ve had more fallbacks than usual, or you can review terminal error logs.


Best Practices to Avoid Fallbacks

  • Ensure that your EMV-enabled terminal is properly configured. A common misunderstanding is thinking you are set up to accept EMV cards if your current point-of-sale (POS) system is equipped with an EMV reader slot. The correct software must be installed and testing should be completed before processing chip cards. If chip cards are being rejected and you have to swipe, reviewing the terminal’s configuration is a good first step.
  • Train your employees on EMV acceptance. Half the battle is understanding how to properly process a chip card—and then educating customers on how to use them. Learn whether to insert or tap the card, if it requires a PIN or signature—and practice patience with the new process. The more you know about executing an EMV transaction will help you reduce the need to fall back to swiping.
  • Learn to spot a counterfeit card. Check for any visible damage to the chip or magstripe. A legitimate card hologram is made up of several images taken from different angles, and then stacked on top of each other. This makes the chip appear to change when moved. If the chip appears to be tampered with, check the number on the card against the account number’s four digits displayed on the terminal. Check out this infographic for more tips on spotting a fake.


Heartland Can Help

As EMV becomes the standard for payment acceptance in the U.S., issues are bound to arise. Heartland can provide you with EMV solutions, education and guidance.