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Erik Sordahl, VP of consumer lending, Schools Financial CU, Sacramento, Calif.
One challenge we have came up after we converted to EMV. Going into the conversion it was our understanding that if our member has an EMV card and uses it at an EMV terminal, we are not liable for any fraud. We soon learned about “fallback transactions.” This applies to people who dip their EMV card and it does not work for some reason, so the clerk tells them to swipe instead. When you do that, the liability goes back to the issuer. Some fraudsters are using this to their advantage. They cannot counterfeit the chip, but they can counterfeit the mag stripe, so they pretend to use the chip but then go on to swipe. We could go completely conservative and not allow any EMV card to be used by swipe, but then that risks member impact. Not all merchant EMV terminals are set up correctly, or sometimes the chip in the card is damaged. We have tried to find a middle ground. If we can drill down in the data, we can decline fallback transactions that are taking place at a specific merchant, such as at a particular Walmart, rather than at all Walmarts. Related to this, we are working to spot members who are doing fallback transactions over and over due to a damaged chip, meaning we are liable for those transactions. We get them a new card.