Opinion: 5 Tips to Prepare for EMV Pump Upgrades
By Richard Browne on Nov. 29, 2016ATLANTA -- As convenience stores replace their in-store magnetic-strip point-of-sale equipment with chip-card readers as part of the Europay MasterCard Visa (EMV) data-security standard, another deadline looms on the horizon: the EMV liability shift on the forecourt on Oct. 1, 2017.
Hopes that the date for forecourt implementation will be extended appear to have been dashed with recent major oil company and branded retailer announcements of maintaining the 2017 liability shift date.
Read on for five actions that fuel retailers should consider when planning gas-pump EMV upgrades ...
1. Understand upgrade options
The second half of 2016 has seen an increase in lead times for equipment quotes and installation. These lead times should grow in 2017 as more sites upgrade to EMV.
Waiting until mid-2017 could present many challenges for upgrading gas pumps, according to Conexxus, a member-driven technology association of fuel retailers. The organization identifies a dearth of qualified technicians needed to do the actual at-the-pump installations as a key issue. Executive Director Gray Taylor has estimated that the industry will need 3,000 technicians to do 4.5 million man-hours to install retrofits and pumps. Dispenser manufacturers would also have to ramp up production by 150% to keep pace with demand.
Suggested action: Fuel retailers should contact their authorized equipment distributor and fuel supplier to discuss what they will need to do to accept EMV transactions and meet brand requirements. Understand what must be upgraded, current and projected lead times, and any brand-specific mandates.
2. Survey the site
As production ramps up on new fuel dispensers and EMV retrofit kits, retailers can expect the cost of new equipment to increase. In addition to the actual price tag on new equipment and upgrades, the Fed has indicated an interest rate hike is likely forthcoming next month.
The longer retailers wait to upgrade their gas pumps, the more likely they will pay more for new pumps and upgrade kits. In this supply-constrained situation, c-stores could see price increases in equipment and technician labor costs, plus higher interest rates on financing.
Both major pump manufacturers, Gilbarco and Wayne, are shipping “EMV-ready” dispensers that will require only a software upgrade to process EMV transactions.
Suggested action: Complete a site survey, including both equipment and labor quotes. These costs need to be part of each site’s 2017 budget, including plans for capital or financing.
3. Talk with customers
Consumers’ concerns about credit-card fraud continue to grow. The accelerating use of EMV at other retail and restaurant outlets will further heighten consumer awareness of a “safe” (EMV) and a “risky” (mag-stripe) way to pay.
Experts predict that the United States will see decreases in card fraud similar to the declines in other EMV countries, where fraud has dropped from 33% to more than 90%. Criminals will view unattended non-EMV gas pumps as a prime target for fraud.
These two factors will result in consumers seeking to buy their fuel at EMV-enabled sites. Even if only 10% of a c-store’s customers are security-conscious and choose to fuel somewhere else, will the store be able to recover the lost fuel and inside sales elsewhere?
Suggested action: Talk to customers and understand their perceptions and concerns about credit- and debit-card security. Try to estimate what percentage of customers may change to another site if they cannot use EMV at the pump.
4. Determine brand requirements
Major branded retailer sites are lagging behind national big-box stores and large private-label regional independents when it comes to upgrading to be EMV-ready at the pump. The major oil brands already have begun communicating their positions and expectations for the forecourt. Several expect to hold to the October 2017 liability shift and transfer this exposure to retailers who are not EMV-enabled.
Other brands are leaving the EMV decision up to the jobber or retailer based on local market assessment and site volume; in this case, the liability will rest with the retailer or marketer. Just as most brands have announced that they have stopped or will stop accepting liability on in-store credit-card and debit-card fraud in 2016, it’s likely that most brands will communicate firm deadlines for gas-pump fraud liability in the coming months.
Due to current oil prices, it’s unlikely that there will be major subsidies from the major oil brands for new or upgraded EMV dispensers.
Many brands have announced that they expect to have EMV software and processing ready and operational by October 2017. If this comes to pass, the speed of EMV adoption will become dependent upon equipment and technician lead times.
Suggested action: Understand the EMV requirements for fuel dispensers for each site’s particular brand, and determine whether any upgrade support is available from either the brand or the fuel wholesaler.
5. Consider the options
A significant decision that fuel retailers must make is whether to replace fuel dispensers or install an upgrade kit, which can be less expensive. One major brand recommends that dispensers placed in service more than eight years ago be replaced rather than upgraded. Older fueling equipment incurs higher maintenance costs, and tends to be less secure against other forms of payment fraud and fuel theft.
New equipment can also help bring business from the forecourt into the store by taking advantage of new video screens and signage options, as well as increasing adoption of customer-loyalty programs.
Suggested action: Understand each site’s current maintenance costs and what they may be in the coming years. Understand the brand’s requirements for current and future acceptance of loyalty and other marketing programs. Conduct a realistic competitive analysis: Do competing sites in the trading area have upgraded pumps and LED lighting, making older and less improved sites look less inviting and less secure?
Like death and taxes, EMV at the pump is going to affect everyone in the industry and is something that cannot be wished away. Taking the suggested actions above, and making a plan on if, or when, to upgrade, is a responsible approach to managing any business.
Richard Browne is vice president of marketing for Patriot Capital Corp. Contact him at rbrowne@patriotcapitalcorp.com. Based in Atlanta, Patriot Capital specializes in enabling entrepreneurs to succeed by providing hassle-free equipment financing to retailers in the convenience-store and retail-petroleum fueling industries. Follow Patriot Capital on Twitter @PatriotCapital. Patriot Capital is powered by State Bank and Trust. Click here for a free EMV upgrade cost calculator.