We explore the intricate two-way fluid structure interaction arising due to the flow of a binary system of immiscible Newtonian fluids, composed of upper electrically conducting and lower electrically insulating fluids, flowing within a compliant microchannel, whose walls behave as linear elastic solids. The transport of the fluids along the domain occurs due to the collective impact of pressure gradient and applied electric field. We solve the closed-form system of equations and obtain semi-analytical expressions for the velocity fields and channel wall deformation from the coupled elasto-hydrodynamic problem. We then delineate the effect of four pivotal parameters: (a) Debye–Hückel parameter κ¯, (b) upper wall slip length, ls¯, (c) viscosity ratio, μr, and (d) elasticity ratio, Nr, on the morphological evolution of the wall deformation characteristics and the spatial distribution of the velocity profile of the fluids. Observations establish a positive co-relationship of wall deformation with fluid pressure, showcasing an increased collapsibility with augmented pressure gradients. Consequently, the channel walls show enhanced deformation with a decrease in κ¯, ls¯, μr and with an increase in Nr. We also demonstrate from our model that by properly tuning the applied pressure gradient and electric field, it is possible to achieve counterflow of the two fluids. We also consider the effect of heat generation in the fluids due to viscous dissipation and Joule heating, which dissipates to the surrounding by the mechanism of conjugate heat transfer. Accordingly, we provide semi-analytical expressions for the temperature profile distribution within the channel, and discuss their variation with three thermo-physical parameters: (a) Biot number of the top wall (Bi1), (b) Peclet number of the top fluid (Pe1), and (c) ratio of the thermal conductivities of the upper conducting fluid to that of the upper solid wall (kr2). We establish from our investigation that with the increase in Pe1 and with the decrease in Bi1 and kr2, the overall system temperature enhances. Finally, in order to design a thermally efficient system, we compute the global entropy generation rate in the system and evaluate optimum values of, Pe1, Bi1, and kr2 for which the system exhibits highest second law efficiency. We expect our findings to contribute toward the development of optimized microfluidic devices fabricated from deformable elastic materials.