‘Tens of Thousands of Dollars’ in Fraud for Operators That Don’t Upgrade Gas Pumps to EMV, a Report Estimates

When the big card networks this spring postponed until April 2021 the fraud-liability deadline for EMV chip cards at gas pumps, the retail fuel industry heaved a huge sigh of relief. But now estimates are emerging that indicate even relatively small gas-station operators that don’t enable their pumps for EMV by that date could face tens of thousands of dollars in monthly fraud losses for each station.

American Express Co., Discover Financial Services, Mastercard Inc., and Visa Inc. have said they will shift liability for fraud on gas pumps to the stores if their pumps can’t accept EMV. The deadline for the shift had been originally set for this fall, but the networks postponed it in recognition of the struggles merchants were having with the effects of the Covid-19 pandemic. Most other U.S. retailers adopted EMV years ago in the face of similar liability deadlines from the networks, but gas-station operators won a delay based on the complexity and expense of converting their pumps. 

Now a report released Thursday by payment-network technology provider Transaction Network Services Inc. and consulting firm Mercator Advisory Group Inc. indicates—for the first time, the two companies say—the extent of the potential cost to station owners whose automated fuel dispensers (AFDs) aren’t equipped to read chip cards. In an example offered by Mercator, an operator with 12 locations spread evenly among areas deemed be low-, medium-, and high-risk, would face fraud liability totaling $17,315 per store over 12 months, or $207,783 overall. “This could change dramatically depending on the risk position of each station, and it should be noted that Mercator’s calculation takes a decidedly conservative approach,” said Tim Sloane, vice president of payments innovation at Marlborough, Mass.-based Mercator, in a statement.

Fraud losses on AFDs in 2020 will total $451 million, according to an estimate from Conexxus cited by the release from TNS and Mercator. Alexandria, Va.-based Conexxus develops technology standards for fuel retailers and convenience-store operators. That estimate was made in 2019 and assumed the EMV liability shift would occur in October, Brian DuCharme, vice president for product management for payments at Reston, Va.-based TNS, tells Digital Transactions News. 

All told, DuCharme cites a “rough” estimate that about one-third of all fuel pumps—mainly those operated by well-known convenience-store brands—have been converted to EMV so far.

The release also cites a Conexxus estimate that counterfeit fraud fell 87% from September 2015 to March 2019 for retailers that had adopted EMV. “After five years of EMV, consumers are expecting [terminals] to be chip-enabled,” says DuCharme. “So there’s no confusion in not doing it.”