Fuel merchants across the country are regularly targeted. This is just the tip of the iceberg:

• A 12-person organization in Colorado racked up an average of $2.5 million per week in fraudulent charges to credit card numbers stolen from gas pumps.3

• Florida’s Department of Agriculture and Consumer Services found 588 skimmers in gas pumps throughout the state just five months into 2019, adding to the total of 2,400 skimmers removed statewide since 2015.5

• Kentucky Department of Agriculture inspectors uncovered a skimming scheme in 2019 at compromised more than 7,000 unique card numbers at several Louisville-area retail locations, leading to the arrest of eight people.6

• In October 2017, authorities in Boulder, Colorado, busted a skimming ring that victimized people in Colorado, Illinois, Ohio and several other states.7

Hal Prince, chief of Florida’s Bureau of Standards – which has its own enforcement personnel – said the state has pursued, arrested and convicted high-profile cases. However, time-consuming coordination between the bureau and federal and local law enforcement can mean lost revenue and paperwork for station owners and service technicians, as well as weights and measures officials.8

Making arrests in skimming cases is difficult, but not impossible. Efforts led by special agents and investigative analysts of the Secret Service are continuing to work closely with state and local law enforcement partners around the country to keep the public informed and apprehend those who are responsible for credit card skimming.9

Responsibility undoubtedly also falls on fuel merchants to secure their dispensers. At a recent petroleum industry seminar, Lt. Marcus Booth, Financial Crimes Unit Director of the San Antonio Police Department said they experienced a threefold increase in skimming crime from 2017 to 2018 and pointed to an industry-driven solution. “It’s critical for merchants to secure their pumps from intrusion or upgrade pumps to eliminate the problem,” he said. “We have yet to see a newer pump with encrypted electronics breached.”

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A NATIONWIDE CRIME OF OPPORTUNITY

There is no honor among thieves. But there is competition. The National Association of Convenience Stores estimates that 37 million Americans refuel each day and over 29 million use a credit or debit card.
Criminals look at those numbers and see dollar signs. Skimming fraud is moving to where the money is, and the ease of the crime is attracting coordinated, sophisticated criminals belonging to Cuban crime syndicates and the Russian mob.

Cuban crime rings have been uncovered from Wisconsin to Alabama and from Florida to Arizona, according to media reports. After apprehending criminals who stole hundreds of card numbers at gas stations across the Phoenix metro area in May 2019, Arizona Attorney General’s Office spokesman Ryan Anderson said, “We believe these individuals are part of a larger criminal network associated with Florida-based Cuban organized crime. We know that these groups are now present in a majority of states, including Arizona.”3

Also in May 2019, Texas Agriculture Commissioner Sid Miller said there is evidence of involvement by Russian organized crime in skimming. “We are finding a lot of them. We are cracking down on them. It’s mainly mafia driven. Foreign mafia groups.”4

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COMBATING OUTDOOR FRAUD WITH EMV TECHNOLOGY

EMV (Europay, Mastercard and Visa) technology can significantly curtail theft and protect fuel merchants from liability for losses. EMV cards feature a microprocessor chip that verifies the card, authenticates the cardholder and authorizes a transaction with a unique set of digital instructions – encrypting the confidential information and dramatically reducing the risk of card counterfeiting and fraud.

The U.S. payments industry began to shift to EMV chip cards in 2011. One of the primary selling points to get merchants to adopt their POS terminals to accept chip technology was its effectiveness in reducing counterfeit fraud, which was the primary type of fraud in the United States at the time.

Fraud losses due to counterfeit, stolen and lost cards hit an all-time peak of $5.4 billion in 2016, but plummeted to $3.9 billion in 2017 once merchants started to accept chip cards, according to data from Aite Group.

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EMV PUTS A SERIOUS DENT IN FRAUD

EMV chip cards and chip-activated merchants combat counterfeit fraud in the U.S.10

• For merchants who have completed the chip upgrade, counterfeit fraud dollars dropped 80% in September 2018 compared to September 2015.

• Over 3.1M merchant locations are now accepting chip cards. That’s a 692% increase since the beginning of EMV migration in the U.S.

• Visa chip cards have increased by 221% since September 2015, from 159 million to 511.1 million cards.

• 98% of overall U.S. payment volume in December 2018 was on EMV cards.

While Visa has been working with merchants, acquirers and fuel industry providers to support migration to the more secure EMV technology, some of the same migration challenges the industry faced when the liability shift deadline was delayed still persist to varying degrees. Visa is monitoring industry progress and attempting to proactively address marketplace realities and known challenges wherever possible, noting unique challenges for the fuel industry, including:

• U.S. regulatory requirements that do not exist anywhere else

• The complicated infrastructure and specialized technology required for automated fuel dispensers

• A shortage of service technicians to install the equipment

• A backlog in getting equipment on time

• Communication integration with the POS system

• Cost to upgrade

The cost of conversion is perhaps the biggest hurdle for fuel merchants. There’s no doubt that making a fueling facility EMV-compliant inside and out can be expensive. The number and age of a site’s dispensers, network bandwidth, fuel volumes and average transaction size are all variables that can cause costs to vary from a few thousand dollars for a small site to tens of thousands of dollars for a larger one. According to Fuels Market News, the wholesale replacement of the physical payments infrastructure for a typical gas pump forecourt with six dispensers could cost about $30,000 to become EMV-compliant. That can be further complicated by multiple types of outdoor terminals, fuel forecourt controllers and one or more electronic payment server applications.

“If the pump cannot accept an EMV upgrade kit, replacement — including new machines, infrastructure changes and labor – can cost more than the average profit an independent fuel merchant will see in a year,” wrote Worldpay Enterprise Relationship Manager Glenda Preen.11

All of this has led some fuel retailers to take a wait-and-see approach. “However, fuel merchants need to understand that, in the end, there is more to gain than lose with the upgrade to EMV-enabled pumps,” Preen said.

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REASONS TO CONVERT

In addition to EMV technology being proven to prevent counterfeit fraud, chip cards also lay the foundation for future payment systems, including mobile payments, biometrics and risk-based authentication.

COMBAT FRAUD TODAY
• More than 1.7 million merchants representing over a third of storefronts are now accepting chip cards, according to Visa

• 388 million Visa chip cards have been issued in the U.S.

• Chip-enabled merchants are seeing a 43% reduction of counterfeit fraud


REDUCE LIABILITY TOMORROW
• Reduced fraud-to-sales ratios, amount and number of counterfeit fraud chargebacks, saving significant dollars

• Individual card brands – including Visa, Mastercard and American Express – could impose significant fines on any non-compliant merchants in the event of a breach

ENJOY FUTURE ADVANTAGES
• The benefits of a competitive advantage from offering safe and secure transactions

• New equipment is more advanced and feature-laden, yielding more for your investment

• Readiness for next generation payment systems like contactless cards and wearables

The larger your operation, the more complicated it is to decide when and how to upgrade. Others who have been through it say the more complex the decision, the sooner the planning should start.

Mark Gruggett, Director of Construction at The Kroger Company said, “I would recommend people start now and have a plan in place. Allow some time for bug resolution.” He added Kroger started the conversion to EMV before the initial deadline for compliance was moved. “We did it for the mitigation of fraud and anticipated effect of liability. We knew it would be a long trek, because we had 8,000 to 9,000 dispensers. And you know how IT functions work – things got bogged down.”

Gruggett’s advice is to look at your options, set priorities, create budgets, and get started now. The longer you wait, especially during a technician shortage, the more likely you’ll be at the back of a very long line. The incentives for upgrading ahead of the April 2021 deadline go beyond avoiding responsibility for counterfeit fraud chargebacks, according to Chelsea Regan, Assistant Editor of Convenience Store News.
“Doing so will allow companies to get up-to-date on next-generation hardware and software, get better access to equipment and technicians, refresh their image and, of course, protect customers.”12

The long-term cost of not being capable of chip card acceptance has the potential to be significantly higher than the cost of the upgrade itself. Partnering with a fuel equipment manufacturer whose product portfolio supports an upgrade path gives retail fuel operators a measure of flexibility.

Since EMV payments are the foundation and the future of payment acceptance, and the liability shift deadline will not move again, choose to work with a reliable expert on all things EMV who can help you with everything you need to know for a smooth upgrade. Dover Fueling Solutions® (DFS), a global leader in fuel dispenser products and software, offers a range of hardware and software solutions for making the transition to EMV as easy and cost-effective as possible—no matter your particular road to compliance. To avoid the backlog caused by the last-minute conversion rush, get started early by contacting your local DFS distributor. A representative will visit your site and gather the necessary information to develop a custom EMV conversion plan. It will be based on your current hardware and software needs and will help you coordinate logistics for a seamless transition.