EMV for Petroleum Retailers
Petroleum retailers across the United States are at a pivotal crossroads when it comes to card present fraud. By October 1st, 2017 all petroleum retailers must adopt EMV or pay for credit card fraud themselves. Gasoline retailers have about two years longer than standard retailers because of the complexity of the technologies used at the pump. In effect, they're one and the same. Whenever you pull up to a gasoline pump and you step out to start fueling your car, you interact with a pin pad device that is connected to an automated fuel dispenser. The current technology “at the pump” is incredibly vulnerable to skimming, so if you hear the card brands talk about it, you hear gasoline retailers talk about it, and videos online about how people skim your payment card information at the pump, you know there are major issues. Skimming money at the pump has become so commonplace that electronic skimmers no longer need a human present to operate. The skimming devices are attached to the normal card swipe or placed inside the cabinets on gas pumps, so a normal customer would have no idea that their cards are being skimmed. Generally, the gasoline retailer never realizes skimmers are being used on their pumps, until they receive a notification from their bank or payment card company.
EMV helps eliminate card present fraud with its chip and pin technology. Credit cards are swiped and the customer must enter their pin number to authenticate their transaction. The new chip and pin technology moves all fraud liability to the payment card company, but it all comes at a cost. Petroleum retailers get to foot the bill for new hardware, but if they choose to stay with current card swipe technology, then they are 100% responsible for card fraud. No chargebacks, no investigations, just a grin and bare it. EMV is designed to eliminate card present fraud, while also allowing merchants to shift all fraud liability to the backing banks. This adoption is expensive, but a necessary hurdle to reducing fraud, while securing your customer’s payments.
Technology Battle At the Pump
From a fuel pump standpoint there are very, very few providers of fuel pump technologies. These are proprietary forms of technology people are using today, which makes it all the more challenging because the gasoline retailers have very few manufacturer or provider choices. Finding fuel dispensers that will reduce fraud, while providing technologies that adapt and move into the future is incredibly challenging. It is a complex environment where you have one technology at the pump where someone's interacting with the pin pad device and the actual fuel pump, and then there's another technology that will move the information from the pump devices, at the pump POS, and the pin pad into the store POS. Once you're in the store POS, the store POS can be a different technology, all together.
Looking at gasoline retailers and truly understanding the challenges that they face – moving to EMV– is not being received very well, because retailers realize that the providers and the manufacturers of these fuel dispensers have cornered the market. You look at the cost of a current pump right now and the cost for EMV compatible pumps is significantly higher. For any type of gasoline retailer, they're paying a considerable amount more than their current devices cost and that's simply by adding a technology that should not interfere with … in theory, how the transaction is transmitted at this point in time. It's a different technology yes, but it's not significant enough of a difference to demand the prices that are being asked for these new automated fuel dispenser/PIN-pad technologies.
Merchants with Multiple Locations Open Your Wallets
Some gasoline retailers have thousands upon thousands of stores and at each one of those stores they have five to ten pumps, so you can imagine what the financial cost will be to replace their pump technologies. Payment Source estimates that the cost will be between $6,000-$10,000 per pump. Again, you multiply that by ten it gets to be very expensive. It's very cost prohibitive for these petroleum retailers and gasoline retailers to update their automated fuel dispensers with EMV compatible dispensers, because right now the amount of fraud that they're experiencing at the pump doesn't necessitate.
As of 2 years ago, NACS reported that the average card fraud connected to “at the pump” costs each location around $700 annually, but Payment Card Industry security standards have increased to approximately $2,000 per year. In other words, merchants could, literally, go years just dealing with the current level of fraud, coupled with the cost of fines and the cumulative amount is way less than the cost of EMV adoption.
Card Brands Extended Petroleum Retailers EMV Mandate
The industry is looking at the pros and cons on this situation and they're very reluctant to adopt EMV and that's the reason why you see the card brands extending out the time period to be EMV compliant for gasoline retailers to 2017, to give them more time to understand and make sure that they overcome the challenges associated with adoption. Furthermore, they want to be able to address the challenges associated with the multiple technologies from the fuel dispenser all the way back to the store POS, as well as the cost associated with upgrading all of these devices. You can see the current pump technologies and the challenges that exist with the current pump technologies, but there is a silver lining. There are opportunities that do exist with updating right now.
The major opportunity these retailers have at the moment is that they can reduce fraud and lower PCI compliance, which is the obvious change by adopting chip and pin technology. You're going to eliminate card present fraud. That's going to be huge for the gasoline retailers and petroleum retailers because they no longer have to deal with the losses there. Yes, they'll have to deal with the losses associated with implementing EMV types of technologies, but the other cool part of the adoption is that they can start moving into new “at the pump” technologies. New fuel dispenser technologies that only will work on a loyalty basis are hugely popular.
EMV is Not The Only Option
Again, using EMV reduces fraud, but new technologies like digital wallets allow people to pay using a different form of consumer authentication besides EMV. Using digital wallet technologies that have a consumer off piece, a biometric, a pin entry, or a tokenization and some kind of (NFC) Near-Field Communication like ApplePay. You look at the cost of these types of technologies and they're much, much less than what you would pay for an automated fuel dispenser terminal that are currently in place. Basically, you are off- loading the responsibility of consumer authentication on the consumer, as opposed to the gasoline retailer. With the new digital payment technologies, you don't necessarily have to spend an arm and a leg in order to get the automated fuel dispensers up to specification.
EMV is coming no matter what. We've already seen it in Europe and Canada. It will be rolled out in the United States and the dates are set. You can either implement or you can accept the liability to pay all the fraud that happens at your own store, which is going to be a significant challenge for you to stomach that burden from a cost perspective. The current payment technologies are deprecating and EMV offers a new way of securing your customer’s transactions. While the cost to changeover to EMV technology will be costly, it will save you the pain of data breaches, rampant card fraud, and most importantly lost customer trust at the pump if you cannot secure their payments. Replacing your current technologies with EMV compatible card present devices will reduce fraud and the payback over time in fraud reduction will take five to ten years to manifest, but in the long run EMV will make your payment acceptance at the pump more secure.
This is one of the times where TokenEx, as a Cloud based tokenization, or Cloud based data security provider offers tokenization with: Support for EMV types of devices, Support for digital wallets, Support for loyalty and other types of consumer related programs. TokenEx gives gasoline retailers a fresh perspective on doing business in an evolving landscape. Stay tuned for Part 4 of our EMV series. Follow us on Twitter and LinkedIn.