As retailers struggle with compliance, chargebacks from the liability shift have been larger than anyone in the industry anticipated.
By Ed Collupy
The implementation of EMV (Europay, Mastercard and Visa) chip card acceptance should be history for inside payment transactions at convenience stores after the much-anticipated October 2015 shift in liability to merchants for counterfeit and lost/stolen card fraud.
But 19 months later, by estimates, less than half of the U.S. c-stores have fully implemented and enabled EMV.
There is only cautious confidence of completing the implementation in the months ahead as merchants talk “struggle” along with service providers who together “hope” or “think” that there will be more conversions this year.
While the root of the c-store/petro implementation situation is in the complex ecosystem that slows technology development upgrades, there seems to be a healthy amount of knowledge about EMV from major merchants outside of the industry.
Some in the card payment industry believe, across retailers, consumer adoption and usage of chip cards has been normalized and a consumer’s first instinct is to dip as opposed to swipe their payment card. But they point out small merchants, of which there are tens of thousands in the c-store industry, need to catch up.
For c-store/petro retailers, the current situation only grows as the October 2020 liability shift for at the pump transactions approaches and they look at what other retail segments have experienced after their initial implementations. To help, the U.S. Payment Forum and its Petroleum Working Committee with leading experts are working “collaboratively to identify, review and resolve” the challenges within the industry and to develop new educational opportunities.
Some major oil brands have led the way supporting operators with enabling EMV. But amongst several leading unbranded chains that I’ve been in touch with, representing thousands of stores, only a handful of their stores have EMV acceptance enabled.
Point of sale (POS) software that supports chip card transactions, with the combination of PINPads and payment acquirers, has been delivered slowly and is compounded by a certification process where queues remain robust—given the number of first rounds and requests from other merchant groups to certify add-on functionality such as contactless EMV.
The associated chargebacks from the liability shift have been larger than anyone in the industry anticipated. To mitigate this new payment card-related expense some chains have ‘turned on,’ for inside the store transactions, AVS (Address Verification System) and/or CVV (Card Verification Value) prompting and validation.
Some relief from the card brands around small tickets and limiting the number of chargebacks from a single account have been helpful, but this is only a stop gap measure that will go away in 2018.
The concern with how long an EMV transaction takes for some c-store retailers is real. One, with multiple POS payment scenarios, reports some chip card transactions exceeding 25 seconds while others take 12-15 seconds. Another retailer, with hundreds of stores, is in a wait-and-see mode before enabling EMV given the added transaction time versus the mitigation steps they’ve taken to successfully reduce chargeback exposure.
Transaction timing seems to be driven by the implementation approach; many retailers my colleagues work with are seeing chip transaction times close to mag stripe times.
ON THE FORECOURT
In the face of both delays with implementing inside EMV transactions and the liability shift date for at-the-pump transactions, service providers are continuing to move forward with development projects that will support chip card transactions at the nearly 1.5 million pumps in the U.S. c-store/petro industry stakeholders are not slowing down and are anticipating there will be some certifications for Automated Fuel Dispensers this year.
Petro retailers, however, have varying plans that run the gamut from it’s barely on their radar, to deferred initiatives or no specific target dates, while others again “hope” they will be complete in a couple of years. Most say though, that part of their strategy is to follow regular pump upgrade schedules and to have those dispensers EMV ready. Some chains told me and others announced they will make store-by-store decisions as to which sites will be EMV enabled.
Retailers who have begun moving forward with dispenser EMV upgrades and many with plans have looked at the investment details and plan to move forward with a key objective of implementing features and functions that dispenser solutions offer that will provide a return beyond limiting the exposure of the liability shift.
Others who have started outdoor projects are building in time to allow the solution to be fully vetted and to deploy at a more reasonable pace and funding schedule.
IT’S NOT OVER
Looking at non-c-store retailers it’s clear there are lessons learned and more to come after the initial chip cards are being accepted at checkout. Consider the following:
• Stay focused; first pilot stores should be about learning and capturing feedback from sites and consumers, and then adjust for configuration validation prior to rollout.
• Work closely with PINPad and POS providers to optimize checkout time and to take advantage of the flexibility in the customer prompts.
• Watch chargebacks: In a chip read failure situation, don’t allow the transaction to go from chip straight to hand key and skip swiping. Merchants have tweaked parameters without recertifying causing data quality issues, which result in an increase of declines and chargebacks.
Clearly, significant work needs to be done to complete the EMV migration inside the store and to be better positioned for the 2020 liability shift date.
Ed Collupy, executive consultant at W. Capra Consulting Group, can be reached at [email protected].