Gas stations are driving down fraud by turning unattended transactions into face-to-face transactions.
"The vast majority of card transactions for gas at the convenience store are unattended transactions, and that emboldens people to commit fraud if the fraudster has to go inside to complete a transaction, there's a good chance that he or she will move on," said Gray Taylor, an executive director at Conexxus and a payments consultant for the National Association of Convenience Stores.
Gas station chains like Chevron and Shell are using technology from Visa to spot odd purchasing patterns in real time. If these oddities are considered signs of potential fraud, the purchaser might be asked to come inside to provide extra authentication to a clerk. The gas stations can also choose to reject the transaction.
Skimming and other forms of credit card crime have afflicted gas stations for some time. Visa's new real-time authorization risk scores complement the additional data the card network provides issuers to help them fight fraud at the pump.
"Gas stations are a really difficult environment to secure," said Mark Nelsen, head of risk and authentication products for Visa. Visa's data shows the type and amount of fuel purchased, as well as the station's location. Visa also analyzes past transactions on the card, whether the account has been involved in a data compromise, and about 500 other pieces of data to generate a score that can also be used to spot odd transactions.
It's not unusual for crooks to use stolen credit cards to buy diesel fuel, for example. They then resell it to contractors near the gas station at a discount for the contractor, but 100% profit for the crooks, Taylor said.
Chevrons branded stations in Los Angeles participated in a pilot of the new Visa program earlier this year, and saw a 23% reduction in fraud at those stations.
"Credit card fraud risk for the gas station is similar to other brick and mortar merchants, except that gas station customers have little or no interaction with a station employee when transacting at the dispenser," said Andres Porras, manager of merchant acquiring at Chevron.
The risk-based profiles do need some "fine tuning" to minimize false positives and other inconveniences for consumers, Taylor said. "You will have innocent people being forced to go into a convenience store to pay for self-service gas, which is a bad customer experience."
The rate of false positives should be low, Visa said. "Fewer than 1-tenth of one percent (1 in 1,000) consumers will be prompted to see the attendant. So we dont really see this as changing the consumer experience," said Visa spokesperson Sandra Chu in an email.
There is added pressure to increase security at gas stations, which face potential isolation due to the staggered migration to EMV-chip cards in the U.S.
"Because the process to upgrade pay-at-the-pump to EMV is more complex, the deadline to upgrade these terminals was set two years after the rest of the U.S. merchant ecosystem, meaning that we'll see gas stations become even more highly targeted by criminals," said Julie Conroy, a senior analyst at Aite Group. "The introduction of new data and risk scoring mechanisms is something that should help significantly, in terms of both isolating higher risk transactions while also preserving a good experience for the rest of us."
Most U.S. companies face an EMV migration deadline of October 2015, after which they face an increase in fraud liability if they cannot handle EMV-chip cards. Gas stations have until October 2017, "so we want to make sure we had a risk product in place while gas stations are in the transition phase to the new [EMV] technology," Nelsen said.
Other companies are also addressing fraud at gas stations. VeriFone and First Data have partnered on a gas station security program that uses end-to-end encryption and tokenization to protect cardholder data at the counter and the pump. FSE, the security division of EMC, is also involved in the VeriFone/First Data partnership.
This story has been updated to clarify how many consumers Visa estimates will need to make gas payments inside stores.