No Time Like Now

The EMV liability shift for fuel pumps arrives next month. After two deadline extensions, is the petroleum industry finally ready?

The date set for the EMV liability shift for U.S. gas pumps is finally upon merchants and the payments industry. There’s no expectation in the industry that the April 16 deadline—for all card brands but Visa Inc., which has set April 17—will be extended a third time. So where does the retail petroleum industry stand in its quest to add EMV technology to pumps, or automated fuel dispensers in industry parlance?

It’s been almost 10 years since the card brands outlined their plans to bring EMV chip cards to the U.S. electronic payment industry. The original deadline for compliance was October 2017, though gas pumps received an extension to October 2020. Then, a second extension followed last year in view of Covid complications. Now, no more extensions are expected.

Under the liability shifts, fuel retailers, not card issuers, will be financially responsible for counterfeit fraud if their automated fuel dispensers can’t read a credit or debit card’s EMV chip and has to resort to reading the card’s magnetic stripe. Magstripes are far more vulnerable to counterfeiting, and researchers say fraudsters have been hitting gas stations hard now that most other retailers have installed EMV point-of-sale terminals.

But will gas stations be ready next month?

“We’re very pleased with the progress of EMV at automated fuel dispensers,” says Julie Creevy Scharff, vice president of consumer products at Visa. “We don’t see the date changing.” Scharff says nearly 50% of transactions taking place at fuel pumps at the end of January were chip-on-chip. That compares to 10% in February 2020. “Consumers are getting used to seeing it,” Scharff says.

Data communications provider Transaction Network Services Inc. estimates the EMV-compliant total for its customers is more than 50%, says Dan Lyman, vice president of product management. Overall, in the broader market, he estimates the total may be around 50%.

Not all within that industry, however, are wholly satisfied with the effort so far, though progress is being made.

“It’s clear the industry is making progress,” says Linda Toth, managing director of Conexxus Inc., an Alexandria, Va.-based petroleum-industry standards and technology organization. Toth says that opinion is based on three Conexxus surveys starting in 2019 and continuing through autumn 2020.

While adoption is not as fast as some would like, there was a significant shift from those with no sites deployed to those that have some sites deployed with EMV technology, Toth says. “The good majority of people are getting started with it,” Toth says. “If at 100% by April, that remains to be seen.”

‘Very Old Technology’

Some of the persistent issues—such as the limited pool of certified installers who can work on pumps and the complex nature of pumps and networking—remain potent matters, and have been complicated in recent months by pandemic precautions.

Last year, when more restrictive work-from-home measures were in place, technicians came out only when a pump was down, Toth says. “That delayed any rollout that was scheduled,” she says. Work-from-home measures also affected software developers, who in some cases needed to interact with dispensers to write the code, but were unable to do so.

Testing staff in quality-assurance labs also were affected, she says. The six-month extension from last October was helpful in this regard, she adds, but the pandemic has endured longer than anyone thought it would.

Though installer availability is also an issue, “it’s probably not as big a problem as we thought it would be,” says TNS’s Lyman.

The pumps themselves may continue to prove a challenge, especially older ones. “We are going to have some providers that have very old technology,” says Ruston Miles, founder and advisor at Bluefin Payment Systems LLC, an Atlanta-based payment-services and security provider that offers a point-to-point encryption service for the petroleum industry.

While Miles estimates there may be 20,000 installers who can touch a pump, in some cases they may encounter simple wiring, which might not transit EMV and contactless payment data, he says.

The nature of petroleum marketing also can cause fragmented adoption. Most U.S. gas stations—estimates peg the total at approximately 111,000—are not owned by the big brands, but by franchises or even individuals in some instances. “As you go down market, you have these markets that might be using a brand we all recognize, but are getting it from a marketer of that brand,” Miles says.

Though the brand may have guidelines for EMV adoption and programs to help defray costs, not all marketers are migrating in unison, Miles says. “Those individual groups within the petroleum industry are each going to go at their own pace,” he adds.

Like Miles, TNS’s Lyman suggests the larger organizations that have significant brands are likely farther along in their EMV conversion, having already made the move or gotten the process going. But there are a lot of smaller organizations that haven’t made the move yet, he says. Anecdotally, though, he is noticing more and more gas stations and convenience stores outfitted with EMV in the forecourt.

Shifting Fraud

The EMV conversion at the pump is estimated to cost $7 billion industrywide, Conexxus’s Toth says. But most fuel retailers understand the reason for the conversion, she says. “Just because someone doesn’t have fraud today doesn’t mean they won’t have it tomorrow.”

Reducing fraud is the primary factor behind the conversion. “The fuel ecosystem is the last remaining place where mag-stripe transactions take place in the numbers they do,” says Visa’s Scharff. “We strongly recommend EMV adoption because it reduces the liability for fraudulent transactions at their stores.”

She adds that it’s not too late for a fuel retailer to make a plan and start the adoption process. “They can get there,” she says. “So, the sooner they get there, the better.”

Even though fuel retailers understand the risk with fraudulent card transactions, they still have to weigh the benefits and costs of adopting EMV at the pump.

“We know there is fraud in the ecosystem that will not go away, it will shift,” Toth says. “There are also cases, mixed bags, when you have people who say they don’t have fraud. It’s hard to justify spending money when they don’t see any return on their investment.”

Reducing or eliminating fraud is the goal, Visa’s Scharff says. “The underscoring reminder is that Visa wants to flatten the fraud curve,” she says. “We want to get fraud out of the ecosystem. That’s a good thing for everyone. That’s the whole reason for the migration.”

The Covid-19 pandemic’s impact on the EMV migration had some positive impacts. As with many retailers, contactless payment became more of an option at convenience stores and fuel retailers, and many added that capability to the pump. Some developed out-of-band payment methods, such as apps that connect wirelessly to authorize a pump and to complete the transaction using a payment card or mobile-payment service.

Miles says lower sales during 2020—with volume down from personal- and business-travel reductions—likely also made it easier for retailers to consider their options and make strategic changes. For example, it may have been easier for managers to think about how improving payment security could reduce the costs associated with fraudulent transactions, he says.

The lower volume, however, meant less revenue, and many retailers had to think hard about where to make investments, Miles says. Related to Covid-19, many consumers have become accustomed to contactless payments, and some fuel retailers that have already installed EMV technology in the forecourt may have to go back and install NFC-equipped readers, he says.

Toth says that, prior to Covid-19, as many as 40% of respondents in one survey were undecided about adding contactless to the pump. After the pandemic’s onset, that dropped, she says.

‘Pockets of Trials’

To help clients offset some of the EMV-adoption costs, Lyman says TNS suggests looking for opportunities to drive sales and additional revenue. One retailer is experimenting with offering the opportunity to buy items on the fuel dispenser’s screen. An employee delivers the items to consumers while they pump gas.

“We see these pockets of trials where they’re actively trying to understand the impact,” Lyman says.

As the April deadline looms, fuel retailers and the payments industry possess something early EMV adopters did not: a history of the obstacles and of how consumers reacted.

“You don’t have to have a crystal ball to know what happened with upgrades to payments and security,” Miles says. “We can look back. Now, we will see that same thing happen in the petroleum space. The question is how fast. Many would like it to be faster.”