Chip Reprieve at the Pump -- WSJ
December 02 2016 - 3:03AM
Dow Jones News
Visa and Mastercard give three extra years for industry to
install the new equipment
By Robin Sidel
Gas stations are getting a big break from the credit-card
industry.
Visa Inc. and Mastercard Inc. each announced Thursday that they
are giving gas stations three extra years to install equipment that
accepts the new generation of chip-embedded credit and debit cards
meant to reduce fraud.
The chip-card push creates a delicate balancing act for Visa and
Mastercard, which have clashed with merchants over many issues for
years. The networks want to reduce fraud, but they are also trying
to be sensitive to the gas-station industry after other merchants
last year faced similar delays in getting new equipment.
The move comes at a time when gas stations are struggling to
control fraud that occurs when criminals use counterfeit cards at
unattended gas pumps and install devices on them that skim card
information from unsuspecting consumers.
The card networks said they are extending the deadline for gas
stations due to multiple challenges facing pump owners. These
include equipment shortages and difficulties associated with
removing older gas pumps.
"While we remain committed to moving businesses to chip
technology as quickly as possible, we are also constantly
monitoring industry progress and attempting to proactively address
marketplace realities and known challenges wherever possible," Visa
said in a blog post on its website.
The card networks said gas stations will now face a deadline of
Oct. 1, 2020, for their pumps to accept chip-embedded cards. If a
customer uses a chip card at a pump that doesn't process chip
transactions after that date, the gas station will bear the costs
of fraud. The previous deadline had been Oct. 1, 2017.
The fraud-liability shift took effect last year for other types
of merchants, although millions of small and medium-size businesses
still haven't installed the equipment needed to process chip
transactions.
Currently, card-issuing banks pick up the cost of fraudulent
gas-station transactions tied to counterfeit cards made from stolen
numbers. But the gas stations are on the hook if the physical card
being used has been lost or stolen.
Cards embedded with a computer chip generate a unique code for
each transaction. This makes them more difficult to counterfeit
than traditional cards with a magnetic strip.
Representatives of the gas-station industry expressed relief
about the extension. Equipment upgrades can cost several thousand
dollars per fuel dispenser, according to industry members.
"There was just no way we were going to make the liability shift
date and it was through no fault of our own," said Gray Taylor,
executive director of Conexxus, a group that works on payments
technology issues for the gas-station industry.
Gas stations are already taking other steps to reduce fraud,
including the simple action of padlocking pumps or putting special
seals on them so that criminals can't place skimming devices inside
them.
Chip cards don't prevent skimming because the devices steal card
data that is located on the magnetic strip on the back of the
cards.
The card networks also have fraud-protection programs
specifically targeted toward gas stations that use technology to
determine whether a card user is its true owner. Customers whose
cards trip certain risk factors are asked to complete the
transaction inside the station.
Visa says card fraud has been cut in half at the more than
53,000 gas stations that use its technology.
It is difficult to track the amount of gas-station fraud, in
part because losses are spread among station owners, card-issuing
banks and consumers who often don't realize their card data was
stolen. The gas-station industry estimates it incurred losses of
$250 million in 2013, the most recent year for which information is
available, while the payment-card industry estimates it lost $500
million on fuel-related fraud that year.
Write to Robin Sidel at robin.sidel@wsj.com
(END) Dow Jones Newswires
December 02, 2016 02:48 ET (07:48 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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