When Visa introduced its analytics tool to screen gas station transactions for fraud two years ago, it may not have been viewed in the petroleum industry as relevant to the expensive conversion to EMV payments at the pump.
But the Visa Transaction Advisor has proven to reduce fraud chargeback rates by 51% and counterfeit fraud rates by 54%, at least giving fuel station franchises and operators a way to fend off fraud before — and perhaps long after — the EMV liability shift affects them in 2017.
VTA's effectiveness now has some fuel companies rethinking the urgency of their plans to add EMV security, said Julie Conroy, research director and fraud expert with Boston-based Aite Group.
"Some will take this into account as they look at the business case, as one petrol company told me that their estimate of what it will take to upgrade to EMV is in the nine-figure range," Conroy said.
At the very least, the 2017 EMV liability shift timeline for fuel pumps — already a two-year extension beyond the deadline for other industries — may not seem as daunting or critical for some. EMV security protects against the use of counterfeit cards, a threat that is of particular concern to operators of unattended devices such as gas pumps.
Being able to cut back on chargebacks through VTA at least "allows some to make the decision to phase in chip-capable terminals at the pump, perhaps upgrading those in the highest risk areas first, much as we've seen with ATMs," Conroy added.
After a gas station owner informs Visa of some of its fraud statistics and threshold, or rules, for fraud screening, VTA does the rest. When a transaction occurs, VTA applies risk scores to identify when lost, stolen or counterfeit cards are likely being used at the pumps. If a transaction is suspicious, it informs the consumer that the transaction is denied and must be completed inside the store, which alerts the station operator that the card is suspect.
Since the card brands first introduced an EMV timetable in 2011, gas station operators have struggled with the concept of converting pumps to EMV chip acceptance because of the lofty price tag.
Payments providers have been stepping up technology advancements, some designed to "get around" the EMV problem by introducing different options at the pump or even designing incentives to lure more customers to the indoor terminals in the station, which faced the 2015 liability shift like other retailers.
"One of the reasons we focused on gas stations first through VTA was, even though they had a longer time to upgrade pumps, we knew it was expensive," said Mark Nelsen, Visa's vice president of risk products and business intelligence.
Visa wanted to make sure gas stations had a fraud-screening solution in place while contemplating a strategy for EMV conversion at the pumps, Nelsen said. "This would help them mitigate as much fraud as possible, with no investment required, and it has been well-received," he added.
With no software or hardware upgrades needed, more than 35,000 gas stations in the U.S. are using VTA to screen transactions in hopes of thwarting criminals' latest schemes at the pumps. VTA is not just thwarting fraudulent sales of a single tank of gas, but also those in which criminals purchase large amounts of fuel with stolen credentials to sell elsewhere for cash.
As interest in VTA continues to grow, Visa has plans to expand its use to other business segments, such as unattended kiosks or vending machines, Nelsen said.
"It would work to protect those segments further, giving the merchants incremental risk information for the accounts on cards presented at those locations," Nelsen said.
As part of the VTA process, any time a transaction presents itself as "a little bit unusual," the issuing bank is able to contact the actual cardholder to better determine if a card is counterfeit or if it has been lost or stolen, Nelsen added.
Visa first tested the VTA process at Chevron gas stations two years ago. After Chevron reported a more than 20% reduction in fraud after initial tests, Visa began its nationwide rollout. Since then, the product has been improved through upgrades based on user feedback and provides even stronger protection now, Nelsen said. Chevron did not respond to requests for comment by deadline.
Visa says VTA analyzes more than 76 million transactions each month, and is typically implemented at the national brand level, so local franchise locations are not bothered with that process.
Chevron is currently using VTA to protect against fraudulent transactions at more than 8,000 of its retail locations across the U.S., while Shell has the service deployed in its 15,000 stations across the country.