EMV at the pump
December 05, 2016 / Source: Visa
The introduction of chip card technology has been the most far-reaching change to payments in the last 60 years in the U.S. Visa has been committed to this effort because chip is an important advancement in securing payments and provides the foundation for future innovation. Across the globe, chip technology has been proven to prevent counterfeit fraud, which is the most common type of fraud that results from the massive data breaches that have become regular news headlines in the past 10 years. Chip also lays the foundation necessary for payment systems to support the future of payments, including mobile, biometrics, and risk-based authentication.
There has been great progress with EMV migration in the U.S. to date. 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.
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. Some of these challenges were anticipated as we embarked on the migration to EMV chip and others are unique to the U.S. because of the complexity of the environment and regulatory requirements that do not exist anywhere else.
The fuel segment has its own unique challenges, which we recognized when we first set the chip activation date for automated fuel dispensers/pumps (AFDs) two years after regular in-store locations. We knew that the AFD segment would need more time to upgrade to chip because of the complicated infrastructure and specialized technology required for fuel pumps. For instance, in some cases, older pumps may need to be replaced before adding chip readers, requiring specialized vendors and breaking into concrete. Furthermore, five years after announcing our liability shift, there are still issues with a sufficient supply of regulatory-compliant EMV hardware and software to enable most upgrades by 2017.
We have been engaging with participants throughout the payment system and analyzing the issues extensively. An important element of our study has been that fraud rates at fuel pumps are relatively low—approximately 1.3 percent of total U.S. payment fraud. A number of readily available fraud prevention tools, such as Visa Transaction Advisor (VTA), have been particularly successful in driving fraud lower at fuel dispensers.
Given our discussions with merchants, clients and partners, Visa has decided to delay the U.S. domestic AFD EMV activation date from October 1, 2017 to October 1, 2020. The EMV liability shift at ATMs will not change and will take effect as planned on October 1, 2017. We believe we have reached a balanced conclusion for providing needed, additional time to merchants while continuing to push forward with the migration to chip.
During this interim period, Visa will monitor AFD fraud trends closely and work with merchants, acquirers and issuers to help mitigate any potential counterfeit fraud exposure at AFDs. We will also continue to work with fuel merchants, certification vendors and software suppliers to ensure EMV chip migration efforts continue. Solutions, such as VTA, address verification service and refinements to Visa’s risk-scoring capabilities for fuel merchants have helped keep fraud rates at fuel pumps low. For example, the more than 53,000 gas stations that use VTA have experienced more than a 50 percent decrease in both counterfeit and lost and stolen fraud.
Based on the realities of the current issues fuel merchants face and the critical long-term need for the industry to adopt chip as a solution for counterfeit fraud, we believe these changes are a balanced and manageable way to ensure a successful migration to chip.