Pump It Up: Deadline Looms as Gas Stations Scramble to Install EMV at the Pump

Pump It Up: Deadline Looms as Gas Stations Scramble to Install EMV at the Pump

Pump It Up: Deadline Looms as Gas Stations Scramble to Install EMV at the Pump

Charles Keenan

Charles Keenan

Charles Keenan has written about payments since joining the American Banker as a staff reporter in 1997, a time when automated teller machines were appearing just about everywhere but people's living rooms thanks to the relaxation of surcharging rules.

More Info

With gas stations under the gun for an October 2020 deadline to have EMV chip card readers up and running at the pump, one Mark Twain quote could explain the delay: "Never put off till tomorrow what may be done the day after tomorrow just as well."

It seems hard to believe that progress to meet compliance is slow, given that petroleum retailers were initially required to have EMV-compliant terminals by October 2017, and then given a three-year extension. If only installing EMV at the pump were as easy as filling up the gas tank with a credit card. But in this industry, complexity is a given, thanks to a tangled web of elements that all need certification: payment servers; indoor versus outdoor payment terminals; fuel dispensers and an on-site, back-office systems. Any requirement to dig up concrete to lay new wires requires an environmental review.

All of this has many gas station owners falling behind to meet the Oct. 1, 2020 deadline. If they don't meet it, they face incurring the liability for fraud. "It's still a problem and a struggle," says Randy Vanderhoof, executive director of the Secure Technology Alliance, an industry trade group focused on digital security best practices.

On the Clock - Gas stations have until Oct. 1, 2020 to install chip card readers at the pump. After that, the liability for fraud shifts to them, away from issuers.

Gas stations can still use magnetic stripe terminals after the deadline, but that’s when liability for fraud shifts to them, away from the issuers. EMV cards — or chip cards — make stealing much more difficult because they come with better security, embedded on the chip. High fraud losses from magnetic stripe cards prompted the industry to introduce the liability shift at most merchants starting in 2016. By one measure, merchants that have completed a chip card conversion saw card fraud decline by 76% for roughly a three-year period ended last December, according to Visa.

Yet for gas stations, it's not so easy to upgrade terminals at the pump. One challenge is the size of the market: there are roughly 123,000 gas stations in the United States, according to the latest figures published by the National Association of Convenience Stores. While it's hard to truly get a handle on how many terminals have been converted to EMV, the number could be as low as 25% of the 1 million or so dispensing pumps nationwide, according to Vanderhoof.

EMV terminals have already been installed at many larger chains, which have deeper pockets to make the investment. These terminals might account for as much as half the volume of the gas pumped, Vanderhoof says.

Yet most of these terminals are not ready to be turned on, due to a bottleneck in getting them certified. "There's a big certification backlog," says Linda Toth, director of standards at Conexxus, an industry group that works to implement standards and technological innovation for the convenience store and petroleum retailers. "We are trying to work through some of those issues, but it remains a pretty big headwind. As we near this window to 2020, people are scrambling."

By one measure, merchants that have completed a chip card conversion saw card fraud decline by 76% for roughly a three-year period ended last December, according to Visa.

One certification needed is EMV Level 3, a review conducted by a collaboration of several parties: the merchant, card brand, processor and acquirer. The certification tests every possible type of transaction for the terminal. Yet given most terminals will need to be tested by next October, there are not enough technicians to do the job. There's also a shortage of workers to do the actual installations.

Pick your poison

At stake for petroleum retailers are profits, one way or another. They either need to invest now or accept liability for accepting magnetic-stripe transactions after the deadline. Ignoring it could mean losses in terms of fraudsters migrating to noncompliant terminals. Even so, stations delayed in converting to EMV might need to spend more on security to be on the watch for fraud migration, notes Dan Harrell, chief innovation officer at Invenco, a company that sells outdoor POS solutions.

Meanwhile, the four major U.S. card networks — Visa, Mastercard, American Express and Discover — could raise fees on mag-stripe transactions as one way of forcing petroleum retailers to comply. "If their intent is to push people in a direction that lowers their costs, you can bet they're going to find ways to make sure that you do that," Harrell says.

Many operators are hesitant to make upgrades, Vanderhoof adds, given that margins are thin in the gasoline retail business. Fuel is viewed as a means to attract people into an on-site convenience store, with its more profitable items such as coffee, sandwiches, slushies and beer. Yet upgrade costs can start at $25,000 and can quickly reach $150,000 or more, according to Gas Pos, a vendor selling payment solutions in petroleum retailing.

Another reason for reluctance, especially for independently-owned mom and pop gas stations — they represent about 80% of the market — is the long-term outlook for the use of gasoline as a fuel, according to Vanderhoof. Over the next two decades, more electric cars are expected to be on the road, leading to flattening or a possible drop in sales, Vanderhoof points out. "They are operating already in a declining market with very low margins."

More choice than in 2017

One way to defray the costs is by maximizing the POS to lure customers into the store with offers on-screen for in-store products, Harrell says. "Retailers who are looking to make this investment really need to spend the time to figure out what they want to get out of it," Harrell says. "A lot of these solutions are offering multimedia solutions with the capability to order stuff in the store — types of things that can drive revenue."

Compared with 2017, there are more EMV-compliant software and hardware solutions on the market. Invenco, for example, sells hard-wired solutions. Providers such as Gas Pos also sell wireless ones.

The array of solutions makes any idea of moving the deadline again by the card networks not as likely as last time, Harrell adds. "The usual signs of why they would make an extension are not there," he says. "Solutions just may not be deployed by now."

So it's really no surprise petroleum retailers are on the clock. And new payment technologies seem to always take more time than predicted to take hold. But there's nothing like a deadline to get things done. Twain also had advice here too: "Continuous improvement is better than delayed perfection."

The statements and opinions of the writer do not necessarily reflect those of TSYS.

Other Articles by Charles

Charles Keenan

Charles Keenan has written about payments since joining the American Banker as a staff reporter in 1997, a time when automated teller machines were appearing just about everywhere but people’s living rooms thanks to the relaxation of surcharging rules.

His work at the American Banker included writing about credit and debit cards, merchant processing, and bank stocks. He later freelanced for the Banker and industry publications such as Banking Strategies, Bank Director, Community Banker, and U.S. Banker. He also writes about investing, insurance and health care, and is based in Los Angeles.

Share this story via email or social networks

  1. You Know You've Been Part of the Payments Industry Too Long When…

    Tue Oct 30, 2018 09:00 AM

    You Know You've Been Part of the Payments Industry Too Long When...

    Categories: Articles and Blogs
  2. Winning at the point of sale in the convenience sector

    Mon Mar 18, 2019 12:02 AM

    Winning at the point of sale in the convenience sector

    It’s quite possible that there has never been a more pivotal time in the convenience-store industry. With the obvious exception of e-commerce, the convenience-store and club sectors are the only two other retail channels expected to grow over the next three years – and not nearly as briskly as e-commerce.more...

    Categories: Articles and Blogs
  3. Will Globally Popular Regulatory Sandboxes Ever Crack the U.S. Payments Market?

    Tue Jan 29, 2019 08:59 AM

    Will Globally Popular Regulatory Sandboxes Ever Crack the U.S. Payments Market?

    Categories: Articles and Blogs
  4. Why Your Business Needs to Accept Chip Cards

    Wed Mar 6, 2019 12:06 AM

    Why Your Business Needs to Accept Chip Cards

    It feels like forever ago that the EMV® Liability Switch took place on October 1, 2017. But even now, many businesses have not switched over to taking exclusively EMV (colloquially known as chip cards). more...

    Categories: Articles and Blogs
  5. Why the Payments Industry Needs to Hire More Veterans

    Tue Jul 2, 2019 09:00 AM

    Why the Payments Industry Needs to Hire More Veterans

    Tags: purdy
    Categories: Articles and Blogs
  6. Why It Pays to Be a Payment Facilitator

    Mon Jun 3, 2019 01:02 AM

    Why It Pays to Be a Payment Facilitator

    Payment facilitators. You already know of them and what they do, even if you’re not familiar with the term. In fact, PayPal®—which might be described as the original payment facilitator—is sometimes referred to as a kind of “Super Facilitator,” with Square® being a more recent player.   more...

    Categories: Articles and Blogs
  7. Why Isn't Mobile Pay Usage Spreading Faster?

    Fri Apr 13, 2018 05:52 PM

    Why Isn't Mobile Pay Usage Spreading Faster?

    Categories: Articles and Blogs
  8. Why is Fintech So Focused on New Payment Rails?

    Fri Apr 13, 2018 05:36 PM

    Why is Fintech So Focused on New Payment Rails?

    Categories: Articles and Blogs