[redbluff]

That can be true, but then the transaction is considered "fallback" and most issuer Banks that have any brains will be examining these very closely with their real time fraud systems. Some deny fallback outright, but I am not sure if this is within scheme rules, it may depend on the region.

[cpncrunch]

From what I can determine, the retailer is liable for fraud when using magnetic strip, whether or not the chip has failed:

http://www.emvcanada.com/forum/what-happens-when.html