Replacing gas pump hardware is a big, disruptive move for any fuel seller, but with the sector's EMV liability shift only a year away, more companies are facing the inevitable.
Gas stations were given a two-year extension on the October 2015 deadline that the rest of the U.S. had to meet for accepting EMV-chip payment cards, which improve security over older magstripe cards. But even that extra time hasn't convinced many gas stations to begin the painful process of putting in new hardware.
Gas stations have been able to convert standard point of sale terminals inside their stores, but even in this piecemeal approach they are lagging other industries. POS equipment at gas retailers, on average, is about 3.6 years old, a statistic that is the highest among retailers in a survey by Aite Group.
"It's true that it may be easier than first thought for stations to convert to EMV, but you have to think about how many pumps there are at each station," said Thad Peterson, senior analyst with Boston-based Aite Group. "It's not like putting in three or four POS terminals at a retail operation. Even if you are not replacing an entire pump, is still new technology with a lot of costs."
Terminal hardware and software providers have recognized this dilemma, essentially letting the station operators determine what sort of rollout they want in place for their customers.
NCR Corp. is making its pitch that converting fuel pumps from magstripe card acceptance to chip cards doesn't have to be a complex and lengthy process. The company signed Speedway gas stations to a contract three months ago to deploy its NCR Optic platform for EMV acceptance, and did the same with a smaller petroleum firm, Rutter Farms, last week. Installing Optic means the station is simply adding a touchscreen to its pump, not breaking concrete and completely building new pumps.
At the same time, JPMorgan Chase has continued to sign stations onto its mobile platform for Chase Pay acceptance starting later this year or early next year. Shell Oil and Phillips 66 have agreed to offer Chase Pay as a mobile payment option for its customers. Both Chase Pay and NCR's Optic accept mobile payments through bar code scanning.
NCR's Optic software ties in loyalty program capabilities and mobile wallet acceptance — a combination it hopes will convince more gas stations to choose its product.
"It [provides] the flexibility to address the technology need for the liability shift, but [also] to add value-added services in a way in which NCR has not been able to previously," said Jason Nichols, solutions manager for the Optic Program.
Pump manufacturers generally have one-way communication channels for station operators, offering advertising or video showing news or weather included. Optic provides a high-definition touch screen for retailers to control the customer experience at the pump and in the on-site convenience store.
Despite technology advancements and the looming October 2017 liability shift, the conversion of U.S. gas stations to EMV will likely remain a slow and challenging process, said Aite's Peterson. Fuel retailers not accepting chip-card transactions at the pump after the liability shift are responsible for any chargebacks on fraudulent transactions.
"I am seeing technologies to offset or bridge EMV adoption, such as Visa coming up with a software platform that catches more fraud at the pump than traditional methodologies," Peterson said. "There will also be new anti-skimming technologies in the marketplace, so this is a transitionary period because it is such a complex and costly migration for fuel operators."
Visa provides the Visa Transaction Advisor system for fraud screening at the pump, and describes it as an effective tool that has allowed some gas station operators to buy time for more cost studies and other preparations for converting to EMV.
Beyond the cost of ripping out and installing new terminals, gas stations are also sensitive to the cost of handling individual transactions. If they can get a better deal at the same time as converting to EMV, they are far more interested in the investment.
As such, the door has been opened for small banks and credit unions to find partners to set up mobile payment options at the pump at less cost to retailers through a financial institution mobile banking app.
In a 2016 survey of merchants deploying mobile technology, Aite Group found that 29% of gas retailers currently accept mobile payments, with 19% saying they don't offer it now, but plan to do so. But 45% said they had no plans to add mobile acceptance.
Various other partnerships and alliances have been forming to offer mobile payments at the pump, including Mastercard and mobile commerce platform provider P97 a year ago.
"We have the flexibility to address any rollout plan the retailer needs," NCR's Nichols said. "We understand what is required to introduce new solutions in this industry."
Some station operators may base timing of an EMV rollout on the marketplace and amount of fraud occurring, while some have to consider the weather as part of planning to avoid terminal work during the winter, Nichols said.
"There is no magic formula for this because not only are there technology components, but operational, signage and training to consider as well," Nichols added.
Because many gas stations have converted the terminals in their on-site convenience stores, they may find the advancement of the card brands' Quick Chip technology, a software upgrade to reduce EMV chip transaction times from about 10 seconds on average to two seconds, to be beneficial in a gas station setting, said Simon Hurry, a senior director and EMV expert at Visa.
“It will only take weeks, not months, for merchants that are going directly to Quick Chip to get EMV-enabled,” Hurry said at the Western States Acquirers Association conference this month.
Visa's Quick Chip also streamlines the checkout process, which should come in especially handy for card customers pumping gasoline, Hurry said. In addition, the move to Quick Chip reduces the development and testing time for EMV implementation by up to 85%, he added.
Specifically, Quick Chip saves time by eliminating issuer scripting, response cryptography and card-initiated reversals that were built into the original EMV authorization process. Because the majority of U.S. credit and debit transactions are handled online, rather than offline, the card networks later determined there’s no need for those steps, which were designed for other markets.
“What’s been slowing down EMV is the fact that it can take 30 seconds or more for scripting as a series of systems query one another and resend queries, but Quick Chip bypasses all that,” Hurry said. “For merchants like petroleum retailers that haven’t even begun their EMV rollouts, Quick Chip is especially promising.”
Kate Fitzgerald contributed reporting to this story.