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DT, January 2017

Not So Ready After All
January 1, 2017

The bank card networks have heard the cries of angst from gas stations and have granted a three-year delay in their planned EMV liability shifts for automated fuel dispensers.

Citing the difficulties that gas stations are having in retrofitting fuel pumps to accept EMV chip cards, both Visa Inc. and Mastercard Inc. announced Dec. 1 that they are postponing their Oct. 1, 2017, EMV liability shifts for U.S. automated fuel dispensers (AFDs) until October 2020.

In a blog post, Visa noted that the original deadline was set two years after Visa’s Oct. 1, 2015, point-of-sale liability shift because of the complexities of retrofitting or replacing AFDs. But now, even those extra two years are proving insufficient for many gasoline retailers.

“Given our discussions with merchants, clients, and partners, Visa has decided to delay the U.S. domestic AFD EMV activation date from Oct. 1, 2017, to Oct. 1, 2020,” the statement says. Visa would not comment on the matter beyond its statement.

Visa is not changing its U.S. ATM EMV liability shift, which is set for next Oct. 1. Mastercard’s ATM liability shift occurred three months ago.

A consultant recently told Digital Transactions that the total cost to upgrade U.S. fuel pumps for chip cards could hit $6 billion (“How Ready Are They?” October, 2016). A gas station will spend $20,000 to $30,000, on average, to upgrade pumps that can accept chip card conversion kits, but stations needing to entirely replace old pumps with new EMV-accepting ones may be looking at bills of $50,000 to $80,000 or even higher per location.

“The fuel segment has its own unique challenges, which we recognized when we first set the chip-activation date for automated fuel dispensers/pumps (AFDs) two years after regular in-store locations,” Visa’s statement says. “We knew that the AFD segment would need more time to upgrade to chip because of the complicated infrastructure and specialized technology required for fuel pumps. For instance, in some cases, older pumps may need to be replaced before adding chip readers, requiring specialized vendors and breaking into concrete.

“Furthermore, five years after announcing our liability shift, there are still issues with a sufficient supply of regulatory-compliant EMV hardware and software to enable most upgrades by 2017.”

The liability shifts mean than a fuel merchant whose gas pumps can’t read an EMV chip card will bear liability for any resulting counterfeit fraud. Issuers today absorb most such fraud losses. Delaying the liability shift, thereby lengthening card issuers’ exposure to counterfeit fraud losses from magnetic-stripe credit and debit cards, does not appear to be too risky, according to Visa. The company said “fraud rates at fuel pumps are relatively low—approximately 1.3% of total U.S. payment fraud.”

Visa also said that the 53,000 gas stations that use its Visa Transaction Advisor risk-assessment program have seen 50% reductions in counterfeit and lost-and-stolen card fraud.

Mastercard said in a statement that “EMV compliance for fuel merchants with automatic fuel dispensers brings significant regulatory and implementation challenges. Over the past months, we have had extensive discussions with fuel merchants, issuers, acquirers, and other stakeholders regarding these unique challenges. Today, Mastercard is modifying the automatic fuel dispenser liability shift date from October 2017 to October 2020. This decision applies only to automated fuel pumps.”

Mastercard also reiterated that it now has an artificial-intelligence risk-control service called Decision Intelligence that helps card issuers reduce the number of false declines in purchase transactions.

Before Mastercard’s public announcement, The Electronic Transactions Association, the Washington, D.C.-based national merchant-acquiring industry trade group, put out a statement praising Visa’s decision.

But leading U.S. POS terminal producer VeriFone Systems Inc., which has a large business enabling fuel pumps to accept payment cards, said in a December earnings conference call that its earnings next year will be “tempered” by the networks’ postponements.

“We were disappointed and somewhat shocked at the three-year delay,” VeriFone chief executive Paul Galant told analysts.

—Jim Daly

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