Long live the payment card magnetic stripe! You won’t need those chip cards at gas stations for a looong time.
The march toward protecting consumers from credit and debit fraud with newfangled chip cards is slow, but steady. How slow became apparent Thursday, when Visa and Mastercard announced they were giving gas stations an extra three years to comply with new liability rules that essentially force merchants to upgrade their terminals and refuse magnetic stripe payments.
Gas stations already enjoyed a grace period over other merchants—their deadline was to be in 2017, two years after last year’s 2015 deadline for most merchants. But Visa and MasterCard announced Thursday they were giving station operators another three years to install chip readers in gas pumps.
Breaking concrete costly
There’s good reason for this: Gas station operators generally have to “break concrete” in order to upgrade pumps to accept chips. Replacements can cost $30,000, far more than the $1,000 or so that other retailers paid to upgrade their point of sale terminals. There are also not enough smart chip card pumps to go around, apparently.
“The fuel segment has its own unique challenges, which we recognized when we first set the chip activation date,” Visa said on its website. “We knew that the … segment would need more time to upgrade to chip because of the complicated infrastructure and specialized technology required for fuel pumps.”
Visa acknowledges that older pumps may need to be replaced before adding chip readers, requiring the breaking of concrete, and that “there are still issues with a sufficient supply of regulatory-compliant EMV hardware and software to enable most upgrades by 2017.”
In the announcement, the credit card associations stressed the slow and steady march of chip-payment-ready merchants across the country.
EMV marches on
“There has been great progress with EMV migration in the U.S. to date,” Visa said. “More than 1.7 million merchants representing more than a third of storefronts are now accepting chip cards; 388 million Visa chip cards have been issued in the U.S., and we are already seeing a 43 percent reduction of counterfeit fraud at chip-enabled merchants.”
The EMV migration has been marred by fits and starts, however. Consumers have complained that chip payments take longer at checkout than mag stripe transactions. Thousands of merchants still haven’t turned on their chip-enabled terminals because there was a huge backlog in bank certifications required. (Some have sued over this issue.)
Changing a money system is no small task.
Vulnerability still exists
It’s important to note that as long as any magnetic stripe payments are accepted in the United States, the switch to chip cards suffers from a major vulnerability. It means stolen credit card data can still be written to counterfeit magnetic stripe cards and used for rip-offs. In other words, counterfeit card fraud lives on: Card account information can still be used to swipe and steal gas.
Of course, there’s another reason magnetic stripes still matter: Despite an October 2016 deadline for ATM operators to convert to chips, you’ll be hard-pressed to find ANY chip-ready ATMs across America.
Still, the payments industry sees progress.
“The unique challenges facing the retail petroleum industry in upgrading their outside pay-at-the-pump systems to EMV have been an active part of the EMV migration discussions over the last year within the U.S. Payments Forum and its Petroleum Working Committee,” said Randy Vanderhoof, director of the U.S. Payments Forum. “Given the migration challenges for implementing EMV in the petroleum environment, Visa’s and Mastercard’s modification of the liability shift dates will be beneficial to the retail petroleum industry and the U.S. chip migration.”