Even though the deadline was extended to April 17, 2021, many fuel merchants are unprepared to meet the upcoming EMV at the pump requirement. Those that don’t upgrade their fuel dispensers to an EMV reader before the deadline face costs and risks. While the COVID-19 pandemic may seem like the wrong time to enable EMV acceptance, it actually presents an opportunity for merchants to minimize potential losses associated with upgrading.
To learn more about the looming EMV requirement for automated fuel dispensers (AFDs) and why now is the time for operators to upgrade their gas pumps, PaymentsJournal sat down with Brian DuCharme, VP of Payments Product Management at Transaction Network Services (TNS) and Tim Sloane, VP of Payments Innovation at Mercator Advisory Group.
The EMV at the pump requirement
Historically, Financial Institution Issuers of credit and debit cards, branded with branded schemes like like Mastercard and Visa have been responsible for card fraud losses experienced by merchants. As a result, the first version of an EMV card was released in Europe in the mid-1990s. The United States was the last major developed market to adopt CHIP technology, with the first EMV credit and debit cards being introduced in 2011.
The reason behind this change is simple: EMV chip cards are more secure and less prone to fraud than magnetic stripe cards. Magnetic stripe cards were still largely used in the U.S. until 2015, which was the original deadline card companies issued for a majority of merchants to adopt EMV-capable point-of-sale systems. After that deadline, merchants without EMV card acceptance would be responsible for card fraud losses.
Fuel merchants had a later deadline of October 1, 2017 because deploying EMV is much more complicated for them. Multiple infrastructure and system updates, including the pump itself, pump controls, and in-store point-of-sale devices, need to be upgraded for fuel merchants to successfully deploy EMV.
But fuel merchants struggled to reach the 2017 deadline, causing it to be extended to October 2020. Later, Visa again extended the deadline to April 17, 2021 because of the monumental impact the unprecedented COVID-19 pandemic was having on merchants.
Many fuel merchants still haven’t upgraded to EMV…
A significant number of fuel vendors still haven’t upgraded their pumps to accept EMV cards. The Conexxus EMV survey, which was conducted in August 2019, found that 70% of vendors had not yet upgraded to EMV—but 80% intended to. Around 40% indicated that economics was the main reason behind their lack of upgrade, and one in three said they didn’t know how to recoup the investment upgrading requires.
Despite the hesitation, 38% of major fuel oil and distributors are requiring their dealers to upgrade to EMV acceptance at the pump, meaning it’s not optional for many fuel pump operators.
The COVID-19 pandemic has thrown a wrench in many merchants’ plans to upgrade. This is particularly true because substantially less gas is being sold, making current liability costs relatively small. While it may seem like the current risk isn’t high enough to justify the cost of upgrading, the market will eventually recover—and fuel merchants need to be prepared for when it does.
…But there are compelling reasons to do so
There are multiple benefits of having EMV chip acceptance at the pump:
- Preventing fraud and chargebacks
The primary driver behind upgrading to EMV acceptance is to reduce fraud and chargeback costs. The approach of doing nothing is “basically betting against yourself ,” said Sloane. If criminals manage to find a fuel operator’s location and recognize its vulnerability, it has the potential to lose far more than if it had upgraded. Why risk your fuel dispenser becoming a slot machine for criminals.
Alternatively, fuel merchants that don’t upgrade could try to manage fraud manually by requiring customers to come into the station to pay. Ultimately, however, this will cause many consumers to drive past that gas station to find another that has pay at the pump options, resulting in substantial lifetime revenue lost to each customer who goes elsewhere.
- Return on investment opportunities
Looking past fraud, an increasing number of convenience store items, such as food and drinks, are being cross-sold at the pump. Upgrading fuel dispensers to an EMV reader often goes hand-in-hand with upgrading screens and functionality that give consumers a new type of shopping experience at the pump.
A survey conducted by TNS in fall of 2019 found that consumers are interested in additional services and purchase options at the pump. “As merchants enable more commerce options at the pump, they are creating new revenue streams that help provide a return on investment (ROI) to the EMV upgrade,” explained DuCharme. Offsetting the costly task of upgrading is important for fuel merchants—especially those that are worried about recouping their losses.
- Meeting consumer expectations and reducing attrition
Further, consumers have come to expect chip card acceptance from merchants during their daily card transactions. The fact that some fuel merchants have EMV readers but others do not creates confusion and friction in the transaction process, which ultimately leads to customer attrition.
Now is the time to upgrade
COVID-19 has only accelerated consumers’ desire for non-contact pickup and other safe and convenient payment options. While the pandemic may seem like an inconvenient time to upgrade, it is actually the perfect time to do so. “Given the fact that there has been a huge drop in petroleum costs since COVID-19, now is the time for merchants to upgrade if they have to go offline for any period of time to minimize transaction loss,” noted Sloane.
Transaction Network Services is prepared to help fuel merchants enable EMV acceptance
As a global leader in secure communications, TNS has been able to provide connectivity services to the fuel industry for years, making it a trusted and reliable provider. TNS takes the complexity out of connecting the sensitive equipment needed to make secure transactions possible. It works with retailers—and in particular fuel merchants—to help make these upgrades simple, easy, and seamless to accomplish.