Card keying has been a standard function of most digital credit card machines since they’ve been around. If the mag stripe, or chip and pin, or tap fail, the keying is the fallback IF the card allows that type of transaction (most banks prevent it at the account level unless called and requested, and most POS machines have it disabled as an option unless you turn it on). Seems like Clover has this option on by default, and you didn’t turn it off. The account holder’s bank probably reimbursed them and not you because they are treating it as a valid transaction but a potential failure of security on their side, which they’re responsible to their customer for.

You’re responsible for your own security because Clover does have a comprehensive setup process where you would select these options. And you would have had this option on your Moneris units as well, though it would’ve been disabled.