Gas Sta­tions Speed Past EMV


ISO & Agent - - INSIDE 09/10.2017 - By Ch­eryl Wi­nokur Munk

Unat­tended gas pumps would seem to be the perfect use case for EMV’S anti-coun­ter­feit­ing tech­nol­ogy. So why are so many gas sta­tions putting off the EMV tran­si­tion?

Unat­tended gas pumps would seem to be the perfect use case for EMV’S anti-coun­ter­feit­ing se­cu­rity, but many gas sta­tion own­ers are putting off their up­grades for as long as pos­si­ble due to hard­ships that other re­tail cat­e­gories don’t face.

Be­cause of the var­i­ous chal­lenges to make EMV pay­ments at the pump a re­al­ity, Visa and Mastercard agreed back in late Novem­ber 2016 to post­pone the li­a­bil­ity shift for do­mes­tic card pay­ments by three years to Oct. 1, 2020. For many gas sta­tions—most of which are in­de­pen­dently owned—the switchover isn’t as seam­less as plug­ging in a new ter­mi­nal.

“There isn’t a lot of move­ment right now based on the push­back of the dead­line and the rel­a­tively low level of fraud oc­cur­ring at the pump. There’s a wai­t­and-see men­tal­ity,” says Marci Gagnon, vice pres­i­dent of busi­ness de­vel­op­ment and op­er­a­tions at AVATAS Pay­ment So­lu­tions, a unit of Cayan that fo­cuses on the en­ergy and ser­vice in­dus­tries.

Three years seems like a long time, but it’s re­ally not with all that has to be done—es­pe­cially for gas sta­tions that have older pumps. Re­plac­ing these could re­quire sig­nif­i­cant work from a reg­u­la­tory, en­vi­ron­men­tal and con­struc­tion per­spec­tive. “It’s re­ally not a lot of time when you con­sider all the steps and pro­cesses it may take to im­ple­ment the new tech­nol­ogy,” she says.

A frac­tured fuel in­dus­try

There were 152,995 to­tal re­tail fu­el­ing sites in the United States in 2013, the last year mea­sured by the now-de­funct Na­tional Petroleum News’ Mar­ket- Facts. Con­ve­nience stores ac­count for roughly 80 per­cent of the mo­tor fu­els pur­chased in the U.S., and only a tiny frac­tion of these stores are owned by the ma­jor oil com­pa­nies. This means the bulk of the sta­tions are in­de­pen­dently owned, ac­cord­ing to data from NACS, the as­so­ci­a­tion for con­ve­nience and fuel re­tail­ing.

Given this land­scape, it’s not sur­pris­ing that gas sta­tions are at in­con­sis­tent stages of EMV adop­tion. The process is akin to what hap­pened in the broader re­tail in­dus­try, with large-scale mer­chants paving the way for EMV ahead of smaller busi­nesses.

But we are start­ing to see a trickle of move­ment.

In June, Gil­barco Veeder-root an­nounced what it says is the first EMV gas pump trans­ac­tion to be suc­cess­fully pro­cessed in the U.S. at a 49 Fu­els site in North Carolina. Gil­barco has also pub­licly an­nounced an agree­ment with a num­ber of other re­tail­ers to up­grade their pumps to sup­port EMV.

Many gas sta­tions are in the process of test­ing and cer­ti­fi­ca­tion, while oth­ers are hold­ing off a bit to make mul­ti­ple up­grades at once. Pumps last about 15 years, so they want to in­cor­po­rate as much new tech­nol­ogy as pos­si­ble in one roll­out, ac­cord­ing to Randy Van­der­hoof, ex­ec­u­tive direc­tor of the Se­cure Tech­nol­ogy Al­liance. Gas sta­tions are also adopt­ing en­cryp­tion tech­nol­ogy and mo­bile wal­let ac­cep­tance. “It will be more ex­pen­sive to go back in and up­date those sys­tems later,” Van­der­hoof says.

Mean­while, none of the small and mid-size in­de­pen­dent gas sta­tions seem to be very con­cerned about EMV com­pli­ance to­day, ac­cord­ing to Ge­orge Csahiouni, co-founder and man­ag­ing direc­tor of Trans­merit Mer­chant Ser­vices, an ISO. “They know that it’s go­ing to be some­thing that they need to deal with down the road, but the busi­ness own­ers are kick­ing the can down the road,” he says.

Fuel for thought

Cer­tainly, there are hur­dles to rolling out EMV, which is one of the rea­sons the card brands agreed to ex­tend the li­a­bil­ity shift dead­line. For many gas re­tail­ers, there’s no sense of ur­gency, given that fraud rates at fuel pumps are rel­a­tively low—ap­prox­i­mately 1.3 per­cent of to­tal U.S. pay­ment fraud, ac­cord­ing to Visa data.

That—con­trasted against with the steep cost of up­grad­ing—is a ma­jor stick­ing point. In 2014, widely pub­lished fig­ures es­ti­mate the cost of up­grad­ing an in­di­vid­ual pump to EMV to be be­tween $6,000 and $10,000. For gas sta­tions, it’s a big chal­lenge to im­ple­ment EMV be­cause the pumps them­selves may need to be ripped out of the con­crete to re­place not only the hard­ware but the older wiring.

Legacy slow-speed wires can’t sup­port EMV trans­ac­tions, even if the pump it­self could be more eas­ily up­dated or retro­fit­ted. The cost of up­grad­ing would then be com­pounded by the loss of busi­ness dur­ing the up­grade process.

“To me, this is more of a busi­ness

“If you’re a fuel sta­tion that has high fraud rates... even­tu­ally you will con­vert.” ‑Jack Ja­nia, SVP of strate­gic al­liances, Ge­malto

is­sue than it is a tech­ni­cal is­sue. How ex­pen­sive is it go­ing to be to up­grade, and if I don’t up­grade, what will my fraud costs look like?” says Jack Ja­nia, se­nior vice pres­i­dent of strate­gic al­liances for Ge­malto, an in­ter­na­tional dig­i­tal se­cu­rity com­pany based in Paris.

Ja­nia ex­pects the cor­po­rate-owned sta­tions will shift to EMV first, but whether or not most meet the new dead­line re­mains to be seen. The big­ger com­pa­nies have more re­sources and the tech­ni­cal know-how as well as the fi­nan­cial where­withal to do this.

“It’s no dif­fer­ent than a mom-and­pop laun­dro­mat try­ing to con­vert to EMV. They don’t have all the re­sources that big­ger com­pa­nies do,” he says. “If you’re a fuel sta­tion that has high fraud rates, the fi­nan­cial li­a­bil­ity is such that even­tu­ally you will con­vert.”

To jus­tify the ex­pense and has­sle, some gas sta­tions are look­ing for other op­tions that al­low cus­tomers to pay se­curely. One of the tech­nolo­gies be­ing ex­plored is han­dling pay­ments in the cen­ter of the is­land, as op­posed to at the pump it­self, ac­cord­ing to Gagnon of AVATAS. An­other pos­si­bil­ity is for gas sta­tions to re­quire cus­tomers to pay for their fuel in the store, though that’s not such a con­sumer-friendly op­tion. Even mo­bile pay­ments, which more gas sta­tions are de­ploy­ing, don’t re­place the need to im­ple­ment EMV. Roughly 40 mil­lion peo­ple a day buy gas, ac­cord­ing to NACS, and not ev­ery­one is will­ing to use a smart­phone in­stead of a card, Gagnon says.

Cre­ative so­lu­tions

Wayne Fu­el­ing Sys­tems has in­tro­duced a tech­nol­ogy called Wayne Con­nect, which by­passes the need to rip out the sta­tions’ ex­ist­ing wires in the ground to pro­vide high-speed con­nec­tiv­ity needed for EMV. A high-speed router in the store han­dles the heavy lift­ing at the point of sale, while in-dis­penser switch trans­mits data across the sta­tion’s ex­ist­ing wiring.

The tech­nol­ogy has been in use for seven years in Canada. In the U.S., it’s cur­rently be­ing used to run mar­ket­ing and me­dia pro­mo­tions at the dis­penser, but it could also be a vi­able so­lu­tion for gas sta­tions with newer pumps that don’t want to rip up con­crete and in­stall new ca­bles.

“It’s a way to over­come sig­nif­i­cant cost to get EMV at your site,” says Tim We­ston, tech­nol­ogy so­lu­tions man­ager at Wayne Fu­el­ing Sys­tems of Austin, Texas.

Wayne is also look­ing at wire­less op­tions for EMV pay­ments. How­ever, wire­less tech­nol­ogy presents se­cu­rity and reli­a­bil­ity chal­lenges, and a work­able so­lu­tion may not be avail­able un­til later in the year, We­ston says. While Wayne Con­nect meets the high-speed needs of many gas sta­tions, “it’s an­other choice that will be on the mar­ket,” he says.

Gas sta­tions have other op­tions. They can choose to retro­fit fewer pumps, given grow­ing con­sumer de­mand for con­nected cars and mo­bile pay-at-the-pump op­tions. Shell, for ex­am­ple, an­nounced in Fe­bru­ary that Jaguar will be rolling

out 2018 mod­els armed with a new app, “Fill Up & Go,” that in­ter­acts with Shell gas pumps. P97 has in­tro­duced tech­nol­ogy called Petro­zone, which cur­rently works with the 2017 Honda Ac­cord and will even­tu­ally ex­pand to other con­nected cars, ac­cord­ing to Don Frieden, chair­man, chief ex­ec­u­tive and pres­i­dent of P97.

P97’s tech­nol­ogy can also be used with a mo­bile phone. Con­sumers drive up to a par­tic­i­pat­ing gas sta­tion and launch Chase­pay or a pay­ment app from a par­tic­i­pat­ing oil brand. Con­sumers will even­tu­ally be able to pay us­ing other con­sumer-fac­ing apps as well, Frieden says.

Exxon­mo­bil’s Speed­pass is an­other mo­bile pay-at-the-pump op­tion on the mar­ket. It al­lows cus­tomers to pay se­curely with any ma­jor credit card, debit card, Exxon­mo­bil Per­sonal Cards, check­ing ac­count, Ap­ple Pay or Sam­sung Pay. Cus­tomers can also pay for gas us­ing an Ap­ple Watch.

Cum­ber­land Farms, mean­while, of­fers a Smart­pay app that al­lows cus­tomers to save on gas and earn re­wards by fund­ing pur­chases from a linked bank ac­count.

De­spite the grow­ing num­ber of con­nected car and mo­bile pay-at-the-pump op­tions, P97’s Frieden recommends that gas sta­tions retro­fit at least a few of their pumps be­cause not ev­ery cus­tomer will want to pay this way. Re­gard­less, gas sta­tions should try to find a way to save money on the EMV con­ver­sion. “Time and money is re­ally the is­sue,” he says.

The road ahead

Now that Mastercard and Visa have post­poned the li­a­bil­ity shift, gas sta­tions have some wig­gle room to de­ter­mine their next steps.

In the in­terim, ISOS need to work with their cus­tomer base to help iden­tify the best tech­nol­ogy and ac­cep­tance fea­tures, says Ja­nia of Ge­malto, the dig­i­tal se­cu­rity com­pany. ISOS should be en­cour­ag­ing gas sta­tions to think about com­ple­men­tary pay­ment op­tions such as con­tact­less, QR codes and Blue­tooth Low En­ergy. “If you’re go­ing to go through the ex­pense of up­grad­ing your pumps, you may as well fu­ture-proof them by adding other forms of ac­cep­tance be­yond con­tact chip EMV,” he says.

World­pay has been get­ting a lot of in­quiries from gas sta­tions about what they should be do­ing, says Chris Fran­cis, vice pres­i­dent of mar­ket de­vel­op­ment at pay­ment pro­ces­sor World­pay US. Ul­ti­mately, some re­tail­ers will opt take their chances and not switch over—at least ini­tially, Fran­cis pre­dicts. Some re­tail­ers in ru­ral ar­eas may choose to turn off pay-atthe-pump if they feel cus­tomers will ac­cept it be­cause it’s too ex­pen­sive to jus­tify switch­ing over to EMV. “It’s a com­pet­i­tive de­ci­sion they have to make,” he says.

One im­por­tant thing ISOS need to know when talk­ing to their clients is that the li­a­bil­ity shift de­lay only ap­plies to do­mes­tic card use. If a cus­tomer uses a non-u.s. chip card and it’s read as a mag stripe by the gas pump and turns out to be coun­ter­feit, the li­a­bil­ity will shift this Oc­to­ber from the non-u.s. card is­suer to the gas pump op­er­a­tor’s ac­quirer, a Visa spokes­woman ex­plains.

This could be an is­sue for gas sta­tions close to the Cana­dian bor­der, though Me­lanie Gluck, vice pres­i­dent of mo­bile and e-com­merce at Mastercard, says that cross-bor­der trans­ac­tions are generally a small mi­nor­ity of the vol­ume at gas sta­tions. “There’s a lot of traf­fic that goes over and back, but most peo­ple don’t fill up right by the bor­der. And peo­ple don’t rou­tinely go over the bor­der to gas up,” she says.

As for gas sta­tions be­ing pre­pared over­all, Gluck says the nec­es­sary changes vary by lo­ca­tion. When the card brands made the de­ci­sion to de­lay the li­a­bil­ity shift, it was clear “the ecosys­tem was not ready,” she says.

Whether most re­tail­ers will be ready by Oc­to­ber 2020 re­mains to be seen. Gluck says that al­though the date got post­poned, the “vast ma­jor­ity” of gas sta­tions are mov­ing ahead with the multi-year en­deavor.

“These are not small projects,” she says.

Of course, even in an EMV world, gas sta­tions will have to be vig­i­lant about the se­cu­rity of their pumps, says Dave King, a se­nior man­ager with UHY LLP, a na­tional ac­count­ing and con­sult­ing firm. The pos­si­bil­ity of skim­ming de­vices com­pro­mis­ing the mag­netic strip on cards re­mains an is­sue. To pro­tect them­selves, he ad­vises clients to teach at­ten­dants how to in­spect their pumps as part of their shift-end check­list.

Gas sta­tions should have a clear re­sponse plan if at­ten­dants dis­cover a pump has been com­pro­mised, such as alert­ing au­thor­i­ties and flag­ging any sur­veil­lance videos as ev­i­dence. “If there’s no writ­ten plan, at­ten­dants may not know what to do,” he says.

“Peo­ple don’t fill up right by the bor­der. And peo‑ ple don’t rou­tinely go over the bor­der to gas up.” ‑Me­lanie Gluck, VP of mo­bile and e‑com­merce, Mastercard

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