MA MasterCard Incorporated

Visa and Mastercard give three extra years for industry to install the new equipment

By Robin Sidel 

Gas stations are getting a big break from the credit-card industry.

Visa Inc. and Mastercard Inc. each announced Thursday that they are giving gas stations three extra years to install equipment that accepts the new generation of chip-embedded credit and debit cards meant to reduce fraud.

The chip-card push creates a delicate balancing act for Visa and Mastercard, which have clashed with merchants over many issues for years. The networks want to reduce fraud, but they are also trying to be sensitive to the gas-station industry after other merchants last year faced similar delays in getting new equipment.

The move comes at a time when gas stations are struggling to control fraud that occurs when criminals use counterfeit cards at unattended gas pumps and install devices on them that skim card information from unsuspecting consumers.

The card networks said they are extending the deadline for gas stations due to multiple challenges facing pump owners. These include equipment shortages and difficulties associated with removing older gas pumps.

"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," Visa said in a blog post on its website.

The card networks said gas stations will now face a deadline of Oct. 1, 2020, for their pumps to accept chip-embedded cards. If a customer uses a chip card at a pump that doesn't process chip transactions after that date, the gas station will bear the costs of fraud. The previous deadline had been Oct. 1, 2017.

The fraud-liability shift took effect last year for other types of merchants, although millions of small and medium-size businesses still haven't installed the equipment needed to process chip transactions.

Currently, card-issuing banks pick up the cost of fraudulent gas-station transactions tied to counterfeit cards made from stolen numbers. But the gas stations are on the hook if the physical card being used has been lost or stolen.

Cards embedded with a computer chip generate a unique code for each transaction. This makes them more difficult to counterfeit than traditional cards with a magnetic strip.

Representatives of the gas-station industry expressed relief about the extension. Equipment upgrades can cost several thousand dollars per fuel dispenser, according to industry members.

"There was just no way we were going to make the liability shift date and it was through no fault of our own," said Gray Taylor, executive director of Conexxus, a group that works on payments technology issues for the gas-station industry.

Gas stations are already taking other steps to reduce fraud, including the simple action of padlocking pumps or putting special seals on them so that criminals can't place skimming devices inside them.

Chip cards don't prevent skimming because the devices steal card data that is located on the magnetic strip on the back of the cards.

The card networks also have fraud-protection programs specifically targeted toward gas stations that use technology to determine whether a card user is its true owner. Customers whose cards trip certain risk factors are asked to complete the transaction inside the station.

Visa says card fraud has been cut in half at the more than 53,000 gas stations that use its technology.

It is difficult to track the amount of gas-station fraud, in part because losses are spread among station owners, card-issuing banks and consumers who often don't realize their card data was stolen. The gas-station industry estimates it incurred losses of $250 million in 2013, the most recent year for which information is available, while the payment-card industry estimates it lost $500 million on fuel-related fraud that year.

Write to Robin Sidel at robin.sidel@wsj.com

(END) Dow Jones Newswires

December 02, 2016 02:48 ET (07:48 GMT)

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