C-store operators are popping champagne corks and not just for New Year’s. Mastercard and Visa recently announced a 3 year delay in the EMV transition for Automated Fuel Dispensers (AFDs). As the following articles relates, this could result in more gas station and C-Store transaction vulnerability to fraudsters.
Security is the ultimate point/counterpoint effort. But instead of a one-for-one ratio — instead of a 50% increase in security here reducing fraud attacks over there by 50% — many of the security measures adopted in retail result in a net increase of fraud success. Such a situation exists with EMV, and Visa and Mastercard have just made it worse.
Let’s start with the good security news. EMV, executed properly, should pretty much block all cloned cards. In the olden days of retail fraud, that was the most popular means of cashing out stolen payment card credentials. As expected, as EMV slowly makes its way into physical retail storefronts — and by slowly, we mean that today, more than a year after the deadline for EMV came and went, the vast majority of stores have yet to activate EMV — online fraud has increased.
Interestingly, fraudsters have discovered that online fraud is a lot easier and more profitable than physically making cloned cards, let alone less risky. Cyberthieves were never in love with the idea of walking into a store, risking arrest if the cloned cards were discovered. That’s why clueless locals were almost always used to cash the cards in. If they were arrested, there theoretically would be no way to connect them to the real bad guy.
The result is that online fraud is increasing more than in-store fraud is decreasing. And don’t forget that the vast majority of stores don’t yet have EMV protection, so retail is now getting hit from both sides.
In fairness, gas stations do tend to need more time for POS changes, given the nature of their card swipes and the physical changes needed. Those needs, however, should have been addressed with the initial delays — delays lasting two extra years, mind you.
Gas stations and C-Stores certainly lobbied Mastercard and Visa to get the deadline extended, but 3 years seems to be too much wiggle room. Certainly, large and small station operators face a lot of construction and technology work. AFD conversion costs can easily run $10,000 per pump. So the question becomes whether the EMV delay will significantly increase transaction fraud losses. Time will tell—but here’s hoping that the operators’ celebrations do not lead to a 3 year hangover.
Overview by Raymond Pucci, Associate Director, Research Services at Mercator Advisory Group
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