You should always insist that customers at least try to insert their EMV card into the chip reader, even if they say they've been having trouble with their card recently or would prefer to swipe it. Interactions like this should raise a red flag for fraud - swiped cards are much easier to manipulate and fake than inserted ones, so customers who are trying to get around the EMV requirement may be trying to deceive you.
If you don't have an EMV-enabled terminal, customers will have no choice but to swipe their chip cards through the swiper. If the transaction is fraudulent, you are liable for any charges since it was your equipment that allowed the transaction to take place.
On the other hand, a fallback transaction occurs when the customer tries to use their chip card into an EMV chip card reader but the card cannot be read due to an error with the chip. The device will permit the transaction using the magnetic stripe.
If the customer tries and fails to use the chip reader due to an error with the chip, the business is not liable for that transaction.
If you have any questions about this, please call us at 408-295-8360.