Handle EMV chip-read fallback to magnetic-stripe at a chip-capable terminal and manage the liability shift correctly

Steps

1. Configure the terminal to attempt chip read first and only permit stripe fallback after a defined number of failed chip reads, per your processor's fallback settings.
2. Tag fallback transactions with the correct POS entry mode / fallback indicator so the issuer and acquirer can distinguish them from normal magstripe swipes.
3. Route the fallback authorization normally, since it authorizes the same as a standard swipe, but flag it internally for liability tracking.
4. On a subsequent fraud chargeback, confirm counterfeit-fraud liability shifted to you (the merchant/acquirer) if the terminal was EMV-capable and the card was chip-capable but was swiped instead of dipped or tapped.
5. Monitor your fallback transaction rate against network thresholds (elevated fallback rates around 2% or higher at a merchant or chain typically trigger network scrutiny) and investigate broken chip readers or fraud patterns driving it.
6. Track any network fallback assessment fees your acquirer passes through for chip-capable terminals defaulting to stripe, and work to reduce fallback volume.