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EMV Migration: Fuel Retailers Face EMV Day of Reckoning

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As U.S. gasoline prices have remained comfortably below the $3 mark for a full two years, it has effectively removed the prior decade’s attention to frequent price spikes from everyday conversation. However, a new form of “pain at the pump” is on the horizon, as it’s now the fuel operators’ turn to deal with the EMV migration rolled out at other retail point of sale outlets in late 2015.

Operators of fuel dispensers were granted the mixed blessing of two additional years to make their payment terminals EMV (chip card) compliant. This extra time reflected the card networks’ recognition of the underlying cost and complexity of the task at hand. Then, in early December, Visa and MasterCard granted gas stations three more years – until 2020 – to complete the process. This marked the first time the networks withdrew an established deadline in the multi-year EMV migration effort.

A Greater Need to Get It Right the First Time

There are several reasons EMV migration is a larger undertaking for fuel operators. Topping the list is cost – each pump contains its own payment terminal, which must be designed to withstand the rain, freezing temperatures, and other harsh outdoor conditions to which typical in-store checkout terminals are not subjected. This means many gas stations, often owned by independent franchisees, must pony up for a dozen or more heavy duty terminals.

Even more vexing, these outdoor pumps are subject to significant government regulation for tax and safety compliance. As a result, it’s not a matter of simply opening up the pump and installing a new terminal as any change of this magnitude likely triggers an overall government inspection. Therefore, getting it right the first time is even more important for gas stations than it was for other retailers as not too many operators would relish having to undergo a second visit from government inspectors that could have been avoided.

Self-Service Requires Simplicity

On the plus side, fuel operators have the benefit of consumers already being familiar with chip card processes. The consumer experience will be most similar to that found at EMV-enabled ATMs, where MasterCard’s liability shift took effect in October 2016. Like ATMs, most fuel pump terminals are unattended and therefore must be highly intuitive and essentially fool-proof. As an example, many terminals now require cards to be removed before fuel will begin to flow – a safeguard against forgotten cards, similar to some EMV-enabled ATMs not dispensing cash until the card is reclaimed. Visa’s ATM liability shift is October 2017; consequently, a 2020fuel pump transition may be ideal in capitalizing on greater process awareness.

Benefits Extend Beyond Fuel Pumps

Fuel pumps occupy a complicated role in the payments ecosystem. They have long served as a test pad for fraudsters, who can stand unnoticed at these terminals and quickly rifle through a stack of stolen cards, discarding the rejected ones while pocketing the live cards for later illicit transactions. In that sense, they serve as a gateway to future fraud – sometimes at the gas station itself, more often at other retail outlets. Since fraudsters love to attack the “soft underbelly,” plugging this hole will be a big win for card security overall.

The pay-at-the-pump EMV migration will be a big deal, and it will only become a bigger headache if put off until the 2020 “deadline.” Even then there is no requirement to be EMV compliant; responsibility for fraud after that date shifts to the fuel operator.  In addition to the expense burden; however, the last remaining non-compliant gas stations also face the specter of becoming magnets for fraudsters trolling for the “weak link in the chain” terminals. With gas stations increasingly becoming the last non-compliant “kids on the block,” this effect will almost certainly take hold earlier than 2020.

Unfortunately, most operators are likely to treat their new October 2020 liability shift deadline the same way they did the original 2017 one – returning to more pressing daily concerns and procrastinating until the new deadline is upon them. Delaying the inevitable only increases the pain however, and there are reasons to believe that those waiting until 2020 to take action will regret their decision.

Given the cost and added layer of regulation governing fuel pumps as well as some of the pain being felt in other parts of the industry by those of are not yet EMV compliant, maybe – just maybe – I’ll be wrong.   

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