Outdoor EMV Liability Shift: The Catastrophe we will all see Coming

As you are aware, on October 1, 2020, petroleum retailers will be held responsible for the credit card fraud that takes place at fuel pumps that are not equipped to handle EMV transactions.

Upgrades to support these EMV transactions will be expensive.  Most independent operators do not have the money to invest in a capability that does not drive sales and do not have active plans to upgrade their fuel dispensers to support EMV transactions.  Although most seem to appreciate the significance and urgency of the situation, many also acknowledge that the industry is just not prepared.

With automated fuel dispenser (AFD) fraud projected to reach $451 million in 2020, store operators must either retrofit their existing dispensers or entirely replace them.  Outdoor EMV could end up costing dealers between $100,000—$250,000+ per store, which also includes the costly price of the installation. 

Both Visa and MasterCard have formally stated, in writing, that they will not be extending the 2020 liability shift date.  Currently, lost and stolen credit card fraud accounts for 10% of chargebacks, which retailers are now paying.  The other 90% of counterfeit chargebacks are being paid by the banks.  After October 1, 2020, 100% of these chargebacks will be paid by retailers who have not converted their sites to accept outdoor EMV.  With projected chargebacks expected to exceed $201,000 per site in the next seven years, dealers must not wait.

Between the original October 1, 2015, EMV liability shift at the POS and March 2019, there has been an 87% decrease in counterfeit fraud, showing that EMV works.  When the outdoor EMV liability shift occurs, it will create an industry-wide shift between larger and smaller operators and high risk and low risk areas, with criminals favoring the path of least resistance.  The annual projected liability per store is $12,860 in 2021, and $31,396 in 2022.  It’s imperative that dealers get ahead if it.

Having to pay significant chargebacks may be motivation enough for a dealer to move forward with outdoor EMV upgrades, but if dealers wait until they are being hit with these chargebacks because they delayed upgrades, they will also likely to be ordering the needed equipment at the same time.  The result will be a colossal wave of orders which will not only overwhelm the availability of equipment (significant lead time), but also the limited pool of service technicians available to do the upgrades.  Technician demand exceeds supply; there are currently over 700 fuel technician job postings and lead times for available technicians are currently 6—8 weeks and will only get longer. 

EMV upgrades also take many hours, so operators should be prepared for downtime during installation.  Blackout periods, such as holidays and winter weather, should also be considered.  Bottom line, is that the longer it takes for a dealer to upgrade, the larger the monthly chargebacks.  The criminals focus will shift to the decreasing number of sites that have not upgraded. 

Something else to consider; with the increasing number of chargebacks, dealers may have no choice but to stop accepting credit cards at the pump.  Customers will then have to go inside to pay, use a mobile app, or stop going to the site, impacting an operator’s bottom line.  Interestingly, Near Field Communication (NFC)/Contactless transactions are expected to reach $27.23 billion in sales by the year 2023.  That being said, outdoor EMV may also be the catalyst for dealers and consumers to adopt mobile payment solutions.

As dealers contemplate upgrades, dealers should also be making individual site plans and asking the following:

  1. What are the technology upgrade options available?
  2. New dispensers or Retrofit Kits? (10+ years Replace; 0-9 years Replace or Retrofit Kit)
  3. Purchase or Finance?
  4. Does the site have CAT 6-7-8 cables or 2-pair or twisted wires?
  5. Does forecourt communication need to be updated? (Business Grade Broadband—internet for forecourt and POS.  EMV = more data per transaction and requires CAT 6 or higher.)

Once a dealer has made the decision to move forward with outdoor EMV upgrades, and prior to installation, be sure that the dealer and technician are discussing contacting providers (Firewall, MNSP, and/or Network).  The POS profile should also be updated and any required permits (Building, EPA) should be obtained.

There still may be some operators who have no plans whatsoever to upgrade to outdoor EMV.  For those sites, Triple Debit Encryption Standard (TDES) will be required.  If a site does not have TDES, pin debit must be disabled.  But remember, TDES does not replace EMV; lost, stolen and counterfeit chargebacks will be the operator’s responsibility—100%. 

Upgrading to outdoor EMV will not be easy.  Operators who have already upgraded their sites offer the following advice:

  1. Be patient.
  2. Expect longer downtimes.
  3. Ensure that technicians are following a site’s implementation and installation guides (all processors are different).
  4. This is new software for EVERYONE.
  5. Expect a few hiccups with software bugs.

Keeping this advice in mind, here are some best practices for outdoor EMV upgrades:

  1. Avoid Fridays and holidays.
  2. Technicians must use and follow customer-specific POS implementation and installation guides.
  3. Individual site surveys should be completed prior to ordering pumps.
  4. Test and verify transactions with the payment processor before the technician leaves.
  5. Ask the technician to stay an additional 30—60 minutes to watch for issues.

Final Thoughts

The 2020 liability shift will dramatically impact the industry.  Without enough resources available to meet the needs of the entire industry, many operators will find themselves fighting for a very limited pool for leftover resources.  Operators who take early action will have the best opportunity to make the most of a difficult situation that is not going to change.