Fueled for Thought By Joe O’Brien, Source North America Corporation
As the saying goes, most things worth doing in life are hard. Such is the case with the U.S. conversion to the global EMV (Europay, MasterCard and Visa) credit and debit payment standard.
As with any major migration to new technology, there has been some thorny feedback about the rollout of EMV in the United States. Many fuel retailers are grappling with the upgrade requirements — from both a logistics and financial perspective — while not reaping the full benefits of EMV’s PIN security, which has been delayed by most banks to help ease consumers into the technology through signature authentication first.
That notwithstanding, with the liability for fraudulent point-of-sale charges shifting from banks to retailers earlier this year, and liability for automated fuel dispensers set to shift to retailers in October of 2017, fuel retailers have much to gain from the EMV conversion. While it may seem as though retailers are being strong-armed into completing data security upgrades, the migration represents an opportunity for fuel sites to become more competitive over the long-term. By deploying additional strategic forecourt updates in conjunction with the EMV conversion, retailers can leverage branding enhancements, modern marketing strategies and efficient pump technology to significantly enhance the customer experience and, ultimately, increase both their sales volumes and margins.
The ABCs of EMV
EMV leverages a computer chip on the front of payment cards to provide a more secure form of authentication than traditional magnetic stripe cards. It is projected that, over the long-term, the chip cards should substantially reduce credit card fraud in the United States. During the “Are You Prepared for EMV?” program presented at this year’s NACS Show, industry experts estimated that if the U.S. does not adopt stronger card data security measures, the U.S. could expect card fraud to increase by over 75% by 2020 — equating to billions of dollars in fraudulent charges.
Although EMV conversion is not legally required, banks and card-issuing financial institutions have taken a unified stance that they will no longer hold themselves liable for fraudulent card activity that takes place by non-EMV compliant systems. Retailers who don’t institute EMV technology put themselves at risk for costly chargebacks — and that risk will grow. Here’s why: card-skimming operations are expected to target non-EMV fuel sites aggressively in the coming months. As more EMV cards begin to circulate, experts overwhelmingly agree that criminals will turn their attention to the cards that present the path of least resistance (magnetic stripe cards). During the NACS program, the speakers projected that non-EMV sites could face an estimated $40,000 in losses due to fraud in the next five years.
Almost one million pieces of forecourt equipment are expected to be upgraded or replaced by the time the EMV conversion is complete. This includes 326,000 POS systems and 721,000 dispensers. In addition, the industry is expected to perform an estimated 127,500 updates to data and connectivity infrastructure to accommodate the additional bandwidth needed for processing EMV transactions.
Factoring in the installation costs, overhead and equipment downtime that are part of these updates, it’s easy to see how the costs to fuel retailers can quickly add up. These costs have been a source of contention for independent fuel retailers in particular. The U.S. House of Representatives Committee on Small Business recently heard testimony from frustrated retailers about the cost of converting POS systems and dispenser card readers, which is averaged $26,000 per site, compared to the average annual store profit of $47,000 per year.
Lessons from Phase 1 for Phase 2
When it comes to the migration, fuel retailers, C-store operators and card issuers across the country are in various stages of completion. According to CreditCards.com approximately 60% of U.S. credit cards and 25% of U.S. debit cards will be issued as EMV cards by the end of 2015. Although the deadline for Phase 1 of EMV conversion for in-store POS systems passed on Oct. 1, many sites still have POS upgrades to complete. As the petroleum industry begins to shift its attention toward Phase 2 of EMV — upgrading dispenser card readers and possibly, the dispensers themselves, by October 1, 2017 — there are several things fuel retailers can do to experience a smooth EMV transition:
- Audit your communications infrastructure. Most of the public EMV conversation thus far has centered around POS and automated fuel dispenser upgrades. However, it is critical for retailers to understand that having a capable communications infrastructure is also necessary. EMV data transfers are significantly larger than static magnetic stripe data transfers and, as a result, dial-up Internet access will not support the EMV upgrades. At minimum, business-grade broadband is required.
- Prepare for a complex certification process. At present, obtaining the necessary certifications from fuel brands or networks has been cumbersome at best. Due to the number of potential combinations of EMV certifications that are currently required for POS systems, pin pads, memory protection devices and payment processors, the retail petroleum industry could be completing testing and certification for years to come. While petroleum industry advocates are looking for ways to reduce certification redundancies moving forward, fuel retailers and C-store operators should expect a lengthy certification process in the short-term.
- Order your equipment early. Kara Gunderson, who is the POS Manager for Citgo Petroleum Corp. and one of the speakers at the NACS EMV program, reported that there are only 3,000 technicians who can perform inside and outside upgrades. Retailers who wait until the last minute to order equipment, could find themselves facing significant installation delays or paying a high premium for the service. Consult with an experienced petroleum equipment distributor to develop comprehensive site plans that address the individual needs of C-stores and fuel sites to ensure your equipment and installation needs can be met in a timely and cost-effective manner.
Reasons to Make the Leap to EMV
Although EMV may seem like a tough pill to swallow, retailers who migrate early will realize benefits beyond liability protection. First and foremost, card security is essential to retaining customer loyalty. In the bigger picture though, the equipment upgrades represent an opportunity for an image refresh, especially when implemented as part of a larger, strategic business initiative. Retailers who install mobile payment technology or media-rich dispenser advertising systems (which are shown to increase C-store sales) in conjunction with their EMV upgrades not only position their forecourt for the future, they could optimize installation costs and leverage supplier discounts.
Petroleum equipment consultants can help fuel marketers — ranging from small independent operations to large retail networks — navigate the challenges of EMV. Trusted fuel equipment advisers will identify not only the strategic investment opportunities available on the forecourt, they will offer leads on special pricing programs, cost-savings through dispenser advertising programs and financing opportunities from lenders. Fuel sites that take advantage of these services will position themselves to realize a quicker return on their EMV investments.
Resources
More information from the NACS program, “Are You Prepared for EMV?”, is available in in the Quick Links menu (click Educational Session Presentations) at http://www.nacsonline.com/nacsshow.
Joe O’Brien is Vice President of Marketing at Source™ North America Corporation, which through partnerships with Gilbarco Veeder-Root and NCR is helping numerous fuel retailers and C-Store operators navigate the EMV conversion. O‘Brien has more than 20 years experience in the petroleum equipment fueling industry. Contact him at jobrien@sourcena.com.
