On October 1, 2020 financial responsibility for the counterfeit card charges at gas pumps will shift responsibility from consumer’s issuing bank to the merchant’s acquiring bank.
Convenience store operators who fail to upgrade their fuel dispensers to support EMV chip transactions will be held liable for counterfeit credit card chargeback fees, which may vary from less than a few hundred dollars to more than tens of thousands of dollars/month/site. While the threat to the business is serious, many have not taken action due to the significant capital investment required to achieve compliance. As a result, once the deadline has passed, significant disruption will reshape the convenience store industry. This blog post will help gas station and c-store operators navigate the chaos of the outdoor EMV liability shift.
First and foremost, gas station and c-store operators should realize that unlike the previous 2017 deadline, there has been significant progress with most of the suppliers in the fuel payment ecosystem. Hardware is available, and while software certification continues to be a major stumbling block, there has been significant progress. Back in 2017, it was reasonable to expect the major card brands to delay the deadline. Otherwise, they would have been holding gas station and c-store operators responsible for compliance that was not possible to achieve.
Today, this is not the case. The solutions are available and have been deployed at scale. There will be no further delay. In December 2019, the Merchant Advisory Group formally requested an additional two-year extension. “In response, both Visa and Mastercard have formally stated in writing that they remain committed to the October 2020 Liability Shift activation date for AFD transactions.”
Furthermore, while most operators have not made the necessary upgrades, a surprising number, over 40%, according to the CSN magazine’s recent annual Tech Study, have. One major oil company began notifying all of its operators almost two years ago. Another major oil company has not only fully deployed its EMV compliant solution to its fuel pumps, but it is also marketing the benefits of buying fuel with enhanced security available at their stores. When the outdoor EMV liability shift occurs, there will be a significant market bifurcation between the “haves” and the “have nots.”
Those that have made the upgrade will likely be made up of larger operators. Those who have not made the upgrade will likely be dominated by the smaller operators who, as a collective whole, make up the significant majority of the market.
The significant capital investment required to upgrade aging automatic fuel dispensers (AFDs) has forced the industry to pick and choose who to help. Operators of high volume, healthy businesses are being offered attractive financing packages and, in some cases, complete subsidization in exchange for long term commitments. Operators of struggling businesses are left in the gap, waiting to see what kind of aid might be leftover.
While “wait and see” may be the dominant approach by most gas station and convenience store operators, it could carry devastating consequences. The reality is that the card brands are not expected to delay the deadline. After the deadline, gas station and c-store operators will be held responsible for the chargebacks. The burden of fraud will shift from those who have made the outdoor EMV upgrade to those who have not. Instead of waiting for this liability shift to jeopardize their business, convenience store operators would be wise to take action: either invest in the outdoor EMV upgrade, seek help from motivated participants in the retail petroleum ecosystem, or develop exit strategies.