The EMV Waiting Game and What It May Cost You
May 23, 2019 – There is an interesting poker game occurring within the retail fueling industry today – “EMV Hold ‘em” – if you will indulge the analogy. While point-of-sale (POS) providers are working diligently with banks to acquire EMV ® L3 certification, refiners and fuel wholesalers are quietly trying to figure out how they will push fraud liability downstream to the fuel retailer. And many small to medium retailers are trying to call bluffs –holding out on the mandated hardware and software upgrades.
Fuel retailers are citing a wide range of reasons for wanting to upgrade. Some believe the outdoor fraud liability shift will be postponed again, as it was in 2015. Others – who are struggling with the cash flow needed to upgrade – are waiting for potential dealer incentives and assistance that may never come. And some believe the costs of not upgrading to outdoor EMV will be marginal to their businesses.
The fact is the outdoor liability shift is coming in October 2020 as planned. The shift has already occurred in high-fraud markets like Florida, and the card networks have no intention of confining chargebacks to those areas. So, what will chargebacks look like for dealers and station owners who choose to wait? Let’s consider a “typical” fill-up of 20 gallons at $2.25 per gallon – a $45 sale that breaks down something like this:
Fuel Transaction Value $45
Transaction Fee (4%) $2
Product Cost (71%) $32
Marketing & Operational Costs (25%) $11
Chargeback Fee ($25) $25
Total Cost to Retailer $115
Indoor chargeback fees range from $25 to $100 per transaction; outdoor chargebacks are expected to be
similar. And, the cost to the retailer will be more than just the chargeback; they’ll lose the revenue, fees, cost of product sold, plus the related operational and overhead costs that went into that sale. The estimated impact cost of chargebacks is $2.50 to $3.00 per every $1.00 on a transaction. Likewise, if fraud occurs too often at a particular site, the acquiring bank can also mandate monitoring services, passing those costs to the retailer as well – easily doubling this cost ratio. Just five instances a month will result in losses of $600 to over $1,000 depending on your location, acquiring bank and fraud history.
Outdoor fraud at gas stations have been increasing since the indoor EMV conversion. Per a Visa case study, reported outdoor fraud and fraud chargebacks at some non-EMV sites has doubled since 2016. As fuel retailers upgrade to outdoor EMV through 2020 and beyond, the pool of fueling stations exposed to fraud and susceptible to skimming technology will continue to shrink. Fraudsters will quickly learn which sites they can target. Motorists will begin preferencing stations with EMV technology. And the media will gladly provide negative advertising for impacted stations.
So small retailers need to be asking themselves, “How many fraudulent instances can my operations tolerate?” – before losing too much profit, their customers or their business altogether. Avoid the gamble of delaying EMV and contact a Dover Fueling Solutions (DFS) Sales Representative or Distributor today to learn more about a personal migration path to EMV compliance for your business.
To learn more about the EMV “waiting game”, visit the Dover Fueling Solutions page.