ETA Expert Insights: The Last Mile: The One-Month EMV Deadline Countdown & What Happens Next
By Lori Griboski, VP of Sales, Petroleum Card Services, Paysafe
There is now just a month to go until U.S. gas stations’ deadline to comply with Europay, Mastercard and Visa (EMV) standards at the pump, which enter into force April 17th. Already extended several times, the impending deadline looks to be set in the proverbial asphalt.
With mid-April marking a point of no return, now is the perfect time to assess gas stations’ progress in upgrading their automated fuel dispensers (AFDs) to accept chip-enabled card payments and remain EMV compliant. It’s also an opportunity to look beyond the deadline: what happens next for non-compliant merchants, and how will compliance impact those who do upgrade to EMV?
ROADMAP: WHERE ARE WE NOW?
In a sense, April’s deadline for gas stations is the final mile for in-person EMV retail payments. Amidst a broader U.S. shift to EMV cards, in October 2015 the card networks shifted the liability for counterfeit card losses to in-store merchants when they didn’t upgrade their sales terminals to support EMV. This liability shift, which essentially made non-EMV compliant retailers responsible for their own losses due to card fraud, was delayed for gas station AFDs, initially to last October and delayed again by COVID-19.
The pandemic’s impact on supply chains to upgrade fuel dispensers as well as shelter-in-place orders have created an undeniable obstacle for gas stations. With Visa saying there are no plans to extend the deadline beyond April, how many gas stations have negotiated this hurdle to become compliant in time?
Despite COVID-19, gas stations’ AFD upgrades have continued relatively steadily. Conexxus’ EMV Preparedness Survey reveals that the percentage of gas station owners that are 0% compliant fell to 31% by Q3 2020 from slightly over 50% at the start of the pandemic in Q1 the same year.
More broadly, the Petroleum Equipment Institute (PEI) reported in Q4 that 49.5% of gas stations had upgraded. This is consistent with estimates from Visa that through January 2021 a little under half of the card network’s AFD volume could be attributed to chip-enabled dispensers.
This, of course, leaves the other half. What’s delaying these gas stations? Q4 research from the PEI suggests that procrastination is the primary and indeed growing reason for delays, with 72.3% of gas stations citing this factor compared to 56.5% in 2019. On the flip side, the number of gas stations with no intention to upgrade has dropped from 21% in 2019 to just 12.8% in Q4, suggesting that a fully compliant market is just a question of time.
FUTURE PROOFING
Time could prove an expensive commodity for procrastinators. After April 17th, all non-compliant gas stations and their acquirers will be fully liable for all transactions made with magnetic stripe card transactions at dispensers.
The financial risk for gas stations is significant, considering that non-EMV dispensers are already a target for ‘card skimming’ fraudsters, who insert devices to steal the account information from magnetic stripe cards. And card skimming is on the rise at the pump. A third of American drivers (31%) were victims of card skimming in 2020, a jump from 23% in 2019, according to a CompareCards study.
Every time a fraudulent transaction takes place at a dispenser, the gas station and their acquiring bank will now have to cover the chargebacks that were previously the card issuers’ liability. In contrast, upgraded fuel dispensers are essentially protected from card skimmers. Indeed, EMV cards reduce counterfeit fraud overall by as much as 89%, according to data from Visa.
The dwindling number of non-compliant gas stations will also become increasingly attractive to fraudsters facing a smaller pool of gas stations to target. Overall, such merchants are exposing themselves to major potential financial losses, and these could far exceed the admittedly significant investment required to upgrade AFDs.
Given gas station operators’ tight margins, the majority of EMV procrastinators are almost certainly being fueled by concerns about the expenditure of upgrades. However, there are more cost-effective alternatives to full dispenser upgrades such as retrofit kits.
And regardless of the specific short-term investment required, EMV compliance will pay off by future proofing a gas station over the longer term. Aside from protecting their business from fraud liability, gas stations will very likely be favored by customers over non-compliant competitors in the neighborhood. If a driver can choose between a gas station with secure chip-and-PIN or even contactless payments, why would they risk potential card skimming with a magnetic strip transaction?
Ultimately, U.S. consumers’ payment preferences are changing, galvanized by the pandemic. COVID-19 has driven a surge in contactless EMV card payments, with 59% of Americans happier using contactless than a year ago, according to Paysafe’s Q2 2020 research. By making EMV upgrades now, gas stations will help pave the road towards a future of U.S. payments where contactless and even mobile wallets become the new standard.
LORI GRIBOSKI BIO
Lori began her career with Petroleum Card Services (PCS) in 2004 and was quickly promoted to an implementations specialist, allowing her to gain a vast understanding of both the petroleum and merchant services industries. She has spent her career creating an exceptional customer experience for PCS merchants, agents and partners. In 2005, PCS was acquired by iPayment, which was in turn acquired by Paysafe in 2018.