Fuel Merchants Get a Reprieve from the EMV Deadline

The U.S. fuel merchant industry breathed a huge sigh of relief (while wearing face masks, of course), after the credit card networks pushed out the deadline for EMV (Europay, Mastercard, and Visa) compliance.

The EMV compliance is actually about a liability shift on the part of the credit card companies, where fuel merchants will bear all costs related to fraud and chargebacks, not Visa and Mastercard. While that may not be much in terms of actual thefts — fuel merchants traditionally have lower chargeback rates than other merchants; only 1.3% of total U.S. payment fraud — there has been an increase in terms of credit card skimmers and identity theft that fuel merchants are being dragged into.

However, even with programs like Visa Transaction Advisor, the card networks are not able to prevent all the different forms of fraud, so we’re seeing this liability shift, as well as the expectation that fuel merchants will upgrade their equipment to EMV-compliant pin-and-chip readers. Any fuel merchants who don’t have EMV readers will bear all costs related to theft and fraud.

According to PaymentsJournal.com:

A gas station at night. Fuel merchants are breathing a little easier with the new EMV compliance reprieve.

It is nearly impossible for fraudsters to intercept and steal card information from EMV cards. By reducing fraud, the number of chargebacks also decreases. Card issuers today don’t have much leverage to win chargebacks against merchants experiencing fraud, so gas stations themselves don’t usually pay the price of poor security. Because of the looming deadline, however, that will soon no longer be the case.

But even while other U.S. retail merchants had a 2015 EMV compliance deadline, fuel merchants got an extension to October 2017, followed by another one in October 2020.

Gas stations had a later deadline of October 1, 2017, which was extended to October 2020 when it became clear that fuel merchants were struggling to migrate to chip. The extended deadline coincides with fuel merchants’ unique needs that make deploying EMV a bigger undertaking than it is for most merchants. In May 2020, Visa extended the deadline a second time to April 17, 2021, this time due to the unprecedented impact the COVID-19 pandemic is having on businesses.

Blaming the delay only on the pandemic is too simple an explanation though. There are several factors that have gone into the decision.

For one thing, changing and updating payment machines on a gas pump isn’t a simple undertaking. It’s not like you can swap out the machine at the cash register with a simple call to your bank or merchant services provider.

(To be clear: You should swap out the machine at the cash register with a simple call to your bank or merchant services provider. But that’s not the only place you need to swap machines.)

There is a significant cost to swap out all of these machines, much of which will be borne by the independent gas station and franchisees. Even the corporate-owned gas stations have thousands of pumps to change out, which means they have to prioritize their changes and upgrades. Changing them all at once can be an expensive endeavor, even at the best of times.

And because many small gas stations’ sales are down anyway, finding the resources to make those changes is going to take money they’re not making.

It’s also a matter of priorities for the fuel merchants. Because sales are dipping lower, they’re in crisis mode and are looking to cut costs wherever and whenever they can. Improvements, remodeling, and repairs are all taking a backseat to just keeping the lights on. That means swapping out credit card payment machines with new EMV-compliant machines isn’t a high priority, and probably will not be as long as we’re in a pandemic-related recession (not to mention the pandemic itself).

Finally, there’s an inconvenient shortage of not only the actual EMV equipment, but the trained technicians needed to swap out the old equipment for the new. In some states, technicians have even been barred from taking on new projects and are only allowed to repair existing pumps.

It’s one thing for a merchant to not be able to meet the deadline because they held off making the transition, it’s another when there aren’t enough technicians to make the actual changeover for you, even if they’re allowed to..

Bottom line: A very large percentage of gas stations were going to miss the October 2020 deadline, even though they’ve had three years’ lead time. While it’s easy enough for the credit card companies to shift the liability to merchants, it’s quite another to expect them to pay tens of thousands, if not a few hundred thousand, dollars just to make a switch. Larger, more successful gas stations are receiving support from their franchisors and other sources, while small mom-and-pop stations in small communities and rural locations are struggling to survive.

Still, those companies can do what they can to reduce the odds of fraud and chargebacks, which can also reduce their own risk, without incurring thousands of dollars of added expenses.

Fuel merchants, do you need new ways to reduce fraud, prevent chargebacks and disputes, and improve your own security even before you upgrade to EMV machines? To learn more, please visit the Corepay website or call us at (866) 987-1969.

Photo credit: ElasticComputeFarm (Piaxabay.com, Creative Commons 0)