Last fall, EMV® technology was introduced in the U.S. in efforts to combat fraudulent card-present transactions and to shift the U.S. marketplace toward a more secure payment model. The arrival of EMV started a new set of standards set in place regarding payment fraud and liability, causing major disruption for merchants and key payment players. Many merchants were not compliant by the liability shift date and have struggled with EMV adoption even a year later.
There will soon be a new disruption regarding EMV integration, as gas stations must become EMV compliant by October 2017. How will gas stations respond to EMV technology and what challenges will they face regarding the EMV process?
Perhaps the most prominent challenge gas stations will face with integrating EMV is re-wiring all the connections at every gas pump. Currently, gas pumps are connected with a two-wire, standard twisted pair connection. The bad news is that this form of wiring isn’t fast enough for EMV transactions due to the slow bandwidth communications. In order to process EMV transactions properly, all retail fuel merchants will have to upgrade their wiring equipment to the needed Cat 5/6 wiring that will support Ethernet connectivity.
Another major issue gas stations will face is the certification of all new EMV pumps conducted by state officials. Not only will these upgraded pumps need to be tested to make sure they are charging and distributing properly, but will also have to be re-certified – both of which are expensive and could take significant time to complete. Experts predict that these nationwide gas pump upgradescould cost around $6 billion and the upgrade cost for a single pump to be around $17,000.
"It's an economic calculation for the merchant," said Jason Oxman, CEO of The Electronic Transactions Association. "It's a lot harder to replace a gas pump."
Gas stations also face the problem of having less available gas pumps for customers to use while the upgrades take place. This could cause many gas stations to lose profit, as customers will take their business elsewhere where more pumps are readily available.
Gas stations did not have to meet the original October 1, 2015 deadline like other merchants due to the hefty price it will cost them to upgrade all their pumps.
“Self-service gas pumps — formally known as ‘automated fuel dispensers’ — were given this extension because upgrading gas pumps is far more expensive than upgrading normal in-store payment terminals,” says Sean McQuay, NerdWallet’s resident credit card expert and a former strategist at Visa. “This represents a huge gap in safety for any consumer that buys gas at self-serve pumps — or, in other words, nearly nine out of 10 Americans.”
Until gas stations incorporate EMV, both customers and merchants should be on alert for skimming devices at the pumps. Because EMV technology is nearly impossible to scam, fraudsters are taking the work they committed at card-present locations in-stores and are now targeting ATMs, gas pumps, and online websites that currently do not have EMV functionality. To prevent fraud from happening, gas stations should incorporate EMV-compliant pumps as soon as possible despite the temporary drawbacks that may occur during the upgrade process.
"From a criminal perspective, that window of opportunity is shrinking," said Jared Drieling, business intelligence manager at payment data analysis firm The Strawhecker Group. "There's going to be a rush to get those updated."
As the liability shift gets closer, the pressure to become EMV-compliant will become a reality for gas stations. Although there are expected obstacles to arise, the long-term payoff of becoming compliant will be worth it for gas stations in order to keep their business and their customers safe from fraud.