EMV Shift & Truckstops: One Year Later

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Truckstop and travel plaza operators along with the en­tire retail industry are still working to comply with the EMV shift—the move to align credit and debit cards in the United States with proprietary chip technology—that took effect Oct. 1, 2015. Under the new requirements, merchants have to adopt EMV-compliant devices for in-store sales or assume the liability for fraudulent transactions.

The transition has created a num­ber of challenges for retailers, includ­ing installing the equipment, getting the necessary approvals to turn on the machines and educating consumers on how to use the new cards. Retail­ers have also faced a greater number of chargebacks, which are costly.

“Far and away the number one issue I hear from members about is the increase in chargeback fees,” said David Fialkov, vice president of government relations for NATSO. “That applies to those who have and those who haven’t made the invest­ment in the appropriate equipment.”

Fialkov said the increase was ex­pected. “The liability for fraudulent transactions used to rest with the bank. Now it rests with our mem­bers, and they have no way to miti­gate it,” he said.

Mallory Duncan, vice president and general counsel at the National Retail Federation, said more needs to be done to protect retailers. Spe­cifically, he said that the U.S. credit card industry is refusing to replace the fraud-prone signatures used to ap­prove transactions with a far-more-se­cure personal identification number.

During The NATSO Show 2016, Fialkov and Duncan took part in a panel discussion with Chris Heinz, director of finance and operations at Coffee Cup Fuel Stops, to discuss how the transition was affecting operators. Stop Watch followed up with them to find out how the implementation is going now that it has been in place for one year. (See informaton on their session, EMV Shift: The Good, The Bad and The Uglyhere.) 

Lack of Certifiers
The transition has been extremely complex and expensive for mer­chants, installing new equipment alone has cost between $30 and $35 billion, and many retailers who in­stalled new equipment have been unable to get it certified because of backlogs by credit card providers.

“When they put this Oct. 1, 2015, deadline out, they neglected to hire enough certifiers,” Duncan said. “The result is merchants have the equipment there and can’t turn it on until they get a certification from all five major card issuers.”

In June Visa announced new steps to help expedite certifications. “Visa implicitly acknowledged what we were saying—that the EMV transition was screwed up,” Duncan said. “People were waiting in limbo and having a huge amount of chargebacks even though they’d done everything right. They were waiting for Visa and Mas­terCard to certify the equipment.”

Heinz is among those who have a system installed but not yet activat­ed. “We have the chip readers in but they don’t have the software ready to date on diesel,” he said. “With Com­data, we’re told they have software ready but we haven’t seen it yet.”

Fialkov said the entities that do have their equipment certified are the larger retailers, such as Target. “It is the mid-level size businesses who are waiting,” he said.

Chargebacks
Duncan said that since the shift, it has looked like a suspiciously large num­ber of transactions have been pushed back on retailers. In June, Visa sent a note to issuers saying they should not be charging back any items under $25 because retailers don’t collect signa­tures on those, Duncan said.

“On top of that, they should not be charging back more than 10 items per account. Some people were seeing thousands and thousands of dollars charged back, which suggested banks were not being as vigilant as they should be in monitoring fraud,” Duncan said.

While 10 items is an improve­ment, Duncan said it is still a large amount and indicates some people are abusing the chargeback process.

During a meeting NATSO ar­ranged between Rep. Jeff Denham (R-California) and Kashmir Dhoot, the owner of Joe’s Travel Plaza, Dhoot told the congressman that custom­ers are abusing the chargeback pro­cess, but the location is powerless to do anything to stop it. Dhoot said chargebacks and credit card fees are one of the location’s largest expenses. 

Fialkov said it is beneficial for operators to share their experiences with lawmakers because many Mem­bers of Congress aren’t aware of the issue. “They lean on the banks for information on this, so we need to give them the full picture,” he said.

Risk and Liability
Duncan said the EMV shift does not do enough to protect retailers from fees and risks associated with fraud and that could implement a number of measures to reduce retailers’ risks, such as requiring a personal identifica­tion number to approve transactions.

The National Retail Federation took a position that card signatures must be replaced with PINs in or­der to have effective card security, but the credit card companies have avoided PINs. “We could have killed two birds with one stone, but we’ve complicated it again,” he said.

Duncan added that EMV doesn’t re­duce fraud. “It reduces the fraud for the banks. They’re passing along all of the costs from an old system rather than re­designing the system,” he said.

Merchants pay for fraud from transactions by unauthorized users of cards. Banks pay for fraud from counterfeit cards. However, the tran­sition to EMV technology moves the liability for fraudulent, counter­feit transactions to retailers if they haven’t installed EMV-compliant de­vices for in-store purchases.

Pay-At-The-Pump Technology
While the initial transition has been challenging for retailers, there is still more work to be done for fuel retail­ers. Truckstop and travel plaza opera­tors will need to update pay-at-the-pump technology by Oct. 1, 2017, or could be held liable for any fraud.

As Coffee Cup Fuel Stop replaces equipment, even on fuel pumps that don’t yet require EMV-compliant technology, Heinz is installing equip­ment that will meet the requirements once it takes effect.

Bottom Line
Overall, Duncan said he has no con­fidence the transition will improve, despite Visa’s latest announcements. “The networks and the banks have not been ideal partners in terms of helping to make this work through,” he said. 

sectionseparator.jpgIn response to a number of questions from truckstop owners and operators on the Oct. 1, 2015, EMV shift, NATSO prepared a detailed question-and-answer document answering some of the key questions. The Upcoming “EMV Shift”—What Truckstop And Travel Plaza Operators Should Know helps operators prepare for Visa and MasterCard’s move to align credit and debit cards in the United States with those companies’ proprietary chip technology. Read it here.

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