This article is brought to you by Invenco, a NACS Hunter Club member.
With the extended April 2021 deadline behind us, where does the convenience industry stand today with EMV upgrades?
We are six months past the deadline, and there is still a huge amount of work to be done. Uptake has been slower than anticipated. In 2019, Conexxus reported that based on survey results, 58% of sites would not be outdoor EMV compliant before the April 2021 deadline. Conversations with brands and retailers post-deadline point to a significant portion of those sites still needing upgrades today. The characteristics of sites that still need to upgrade have stayed consistent with findings from before the deadline as well. Lower-volume, independently owned sites are upgrading at a slower rate than larger, high-volume sites.
What has changed is the rising pressure from brands and credit card companies to get retailers upgraded. As of the deadline, many brands have implemented penalty fees for sites that have not yet upgraded. These fees are scheduled to increase over time as sites stay noncompliant past the deadline. Brands are also providing positive incentives to encourage retailers to upgrade. Many are offering substantial rebates on equipment purchased to meet EMV compliance. These rebates can cover a significant portion of a retailer’s site upgrade, depending on the solution they plan to implement.
To increase pressure even more, MAG stripes may soon be a thing of the past. Mastercard recently announced that it will not be requiring MAG stripes on its branded credit cards in 2024, and that it plans to remove the MAG stripe completely by 2033.
What is the holdup for many retailers and why is pickup slower than anticipated?
Money! And that nobody wants to spend it. Traditional pump replacements and retrofit kit purchase programs are expensive, and there is nothing exciting about spending upward of $20,000 or $60,000—or even more—on what retailers are looking at as a compliance update or protective measure.
By not upgrading, retailers risk facing some serious consequences, right?
Yes, they do. For sites that haven’t seen fraud up until now, they are more likely than ever to start. This seems to be especially relevant for small town retailers that had known of fraud taking place in more high-traffic areas but had never experienced it themselves. It is a simple formula for fraudsters: When a site becomes EMV compliant, they head to the next one in hopes of noncompliance. This “fraud migration” is not new to the industry, but it is more prevalent than ever post deadline.
To make matters even more precarious, the number of non-EMV chargebacks has risen significantly, with CMSPI reporting a 200% increase between January and May 2021. The average chargeback transaction also has increased from $50 to $70, and more fraudulent charges are moving outside to the pump versus inside the store.
Between moving, increasing and more expensive fraud, the industry is reaching a perfect storm that points to the need for sites to upgrade to outdoor EMV as soon as possible. If they don’t, retailers face the continuously escalating risk of more frequent and more expensive fraudulent charges.
So, what’s a good solution strategy for a retailer to get on the right path with EMV upgrades?
Rental programs. Outdoor payment terminals (OPTs) begin to lose value almost immediately after purchase. They need frequent repairs, become outdated quickly and require regular compliance updates. They are expensive to buy and expensive to own. The alternative is to rent pay-at-pump equipment. By renting, retailers can save thousands of dollars on their upfront costs to become compliant. From there, they pay a low, fixed-rate monthly fee to rent OPTs over a four-year contract. The rental fee includes full-warranty coverage for parts, labor and service, a cost that is unpredictable and increases over time with owned assets. Once a terminal is ready for replacement at the end of contract, it's upgraded to the latest terminal model.
For sites that haven’t seen fraud up until now, they are more likely than ever to start.
With an OPT rental, retailers save significantly up front, don’t have to worry about unexpected repair costs and can keep their sites modern and compliant. Terminal management is a breeze, with supplier-managed software and compliance updates, a fast pop-and-swap repair model should anything go wrong, and a top-of-line terminal with all the latest features included. With so much changing in terms of compliance, customer engagements and payment methods, it no longer makes sense to put money into owned terminals that will need frequent replacement (more money!) and hands-on management.
To put things in the context of your daily life, think of outdoor payment system rental programs like a cellphone plan. If your mobile provider offered a contract where you paid a small upfront cost (think tax and setup), plus a fixed, low monthly fee that provided a top-quality mobile device, free replacement anytime the phone breaks, software and app updates managed by the mobile provider, and an upgrade to the latest phone model at the end of each contract on renewal, would you take it? We would hope so!