Each month, NACS Magazine publishes the “Bits & Bytes” column, addressing the technology issues that affect the convenience and fuel retailing industry. This month’s column by Conexxus Executive Director Gray Taylor discusses the realities and limitations of looming EMV implementation. For more on technology topics, visit Conexxus.org.
As the nation rushes toward implementing EMV — the chip-based replacement for magnetic stripe payment cards — by this October, the truth about this deadline is becoming clearer: Retailers and issuers simply cannot make it happen.
The Food Marketing Institute (FMI), the trade association for grocery and pharmacy retail, formally asked the card brands to delay the liability shift to 2016, and for good reason. First, vendors can’t provide terminals in enough time; there is a 16-week backlog on EMV-capable terminals, a result of delays in an acceptable specification that allows for Durbin routing, among other things. Second — and this should not come as a surprise to the cards — the fourth quarter holiday season is a lousy time to introduce new technology to stores and train consumers!
The convenience industry has the same POS liability shift deadline, but with far more diversity than FMI, making our ability to avoid liability shift much less than the grocery segment. Our POS vendors are scrambling to code, test, certify and install POS implementations, with the more onerous Automated Fuel Dispenser (AFD) deadline looming a mere 18 months from now. In fact, our industry is facing a “double whammy” on installations to avoid liability shift — taking the site down for POS upgrade sometime over the next year (hopefully) — and doing it again two years after that (again, hopefully).
The total cost to our industry will be about $3.6 billion when the dust settles — but that number will increase as we pay a premium for tight implementation schedules.
Conexxus has been engaged with the EMV Implementation Forum Petroleum Special Interest Group (SIG) since its inception last year. With 18 months to go, we have to sort out how — once we even receive a specification for AFD — we get all systems vendors to code, test, certify the myriad equipment combinations, produce 800,000 dispenser heads (of varying configurations) and get them installed with the estimated 3,500 qualified technicians we have in the field. Even if everything works flawlessly, it will be impossible for our industry to meet October 2017 AFD liability shift.
Despite rosy forecasts emanating from EMVCo and the card brands, Javelin Strategy & Research now expects that less than 25% of the cards in circulation will be EMV capable — meaning the issuer will retain liability on 75% of the card base at year-end. Apparently the banks are having a hard time ponying up the estimated $8 billion it will take to implement EMV on the issuing side, perhaps dealing with their own implementation resource constraints.
Retailers and issuers are all on-board to reduce fraud through EMV. We may not agree that EMV would be our first choice in mitigating risk (encryption and tokenization are far more cost-effective), and the lack of required PIN entry in the U.S. implementation seriously waters down EMV’s effectiveness, but the EMV horse is out of the proverbial barn.
What remains is the need for a fact-based approach to deploying EMV; one that takes into account and improves the need for specifications, certifications and very real supply chain constraints. Arbitrary dates for liability shift are one thing but the October 2015 and 2017 dates are becoming absurd.
Conexxus will continue to represent our industry’s needs and realities to the card brands as we sort through the immense “project” of delivering EMV at the forecourt. We can save the industry millions of dollars of unnecessary expense while maximizing the risk reduction benefits of this wholesale change to the payments system. Yet as the sole voice of the industry at the payment card technology table, we need retailer engagement to ensure that our needs are understood and contemplated by the card brands.
Read more from the May issue of NACS Magazine, our annual technology issue.