February 23, 2017
How will gas stations respond to the 2020 EMV deadline?
By the end of 2016, the slow pace of automated fuel dispenser (AFD) upgrades made it clear the 2017 EMV deadline was not going to be met. The complexity of upgrading AFDs and the limited number of regulatory-compliant EMV hardware and software vendors fueled the decision to push the EMV deadline back to 2020.
Given the three-year extension, fuel retailers have three options:
- Continue the EMV migration to hit the 2020 deadline.
- Shift the focus to only accepting mobile payments at pumps.
- Sit back and bank on the trend of relatively low fraud rates at AFDs remaining steady.
Option 1: Continue the EMV migration to hit the 2020 deadline
The National Association of Convenience Stores (NACS) estimates each pump conversion will be between $6,000 and $10,000. Gray Taylor, executive director of Conexxus, reported the per pump price could be as high as $17,000. The short-term cost of this option is high, but in the long term, shouldering the liability of fraud is a frightening prospect.
Another major challenge for gas stations wanting to make the move to EMV at the pumps has been the lack of regulatory-compliant software and hardware vendors. As more vendors complete certification, fuel retailers will have the necessary partners to complete the transition.
Despite the high costs and the current short supply of vendors, continuing the EMV migration for AFDs is a safe and responsible option.
Option 2: Shift the focus to only accepting mobile payments at pumps
Allowing customers to pay quickly through an app on their mobile phone is an alternative to the costly EMV upgrade. Of course, customers who want to pay with their debit or credit cards would have to make the trek inside the gas station to pay on an EMV-compliant terminal.
For customers who have adopted mobile payments, this convenient option would simply require an app. For certain chains, it could increase customer loyalty. However, the opposite might be true for customers paying with cards. While fuel centers are always eager to drive customers inside the store, people who have become used to paying at the pump with a card might see this as an inconvenience and fuel up elsewhere. And, we can’t forget about customers who prefer to pay with cash. Debit or credit card transactions moving inside could cause longer lines, inconveniencing cash-paying customers.
In addition to the impact on customer experience, mobile payment adoption is another major factor to consider. Even though mobile pay is becoming more readily available, consumers are not taking advantage of it. Only 37 percent of millennials and 6.3 percent of people over 65 are estimated to use mobile payments by the end of 2017, which is a concern for gas stations looking at mobile payments as an alternative to the EMV transition.
Option 3: Sit back and bank on the trend of relatively low fraud rates at AFDs remaining steady
One argument against the transition to EMV for AFDs has been historically low fraud at the pumps. Visa even acknowledged this in a blog post stating “fraud rates at fuel pumps are relatively low—approximately 1.3 percent of total U.S. payment fraud.” If the trend of low fraud remains steady, it might not be worth the cost to some retailers to upgrade their AFDs.
One major concern with this option is the anticipated shift of fraud from retail stores to AFDs. As the move to EMV-compliant terminals in retail stores is well underway, fraudsters will start looking at gas stations as vulnerable targets. Throughout 2016, officials in cities across the United States reported skimmers found at gas stations. In Michigan, where 68 credit card skimmers were located and removed in the span of a year, legislators have gone as far as to propose a bill that will require gas pumps with credit card readers to have specific safeguards against skimmers.
Also, as consumers are becoming more knowledgeable about the security of chip card payments, gas stations that don’t adopt EMV might lose business because of it. While this option might seem like the path of least resistance at first, it could very well lead to future hardships.
Regardless of how fuel retailers decide to move forward, their decisions will most definitely impact their customers and their bottom lines. Keeping up to date with the latest technology and ensuring customers feel secure with accepted payment methods is the smartest approach to retain current business, win new business and protect against fraud liability.