This Free Tool Knows What the EMV Liability Shift Could Cost You

This Free Tool Knows What the EMV Liability Shift Could Cost You

November 30th, 2020 - Payments, POS

By Dan Lyman, Head of TNS’ Payments Market Business, North America

Meteorologists use weather balloons and satellites to predict the weather. Accountants crunch lots of data to forecast the financial performance of a business. Managing the daily tasks for a fuel and convenience business has its set of tools as well.

Yet, not all owners and managers have the luxury of time and complete data sets. Sometimes calculating and forecasting potential revenue, costs, profits and losses seems as difficult as a meteorologist trying to figure out which way a hurricane will turn, or a fortune teller seeing the future all spelled out.

That’s why fuel and convenience retailers need to maximize every tool they can to accurately forecast and plan, especially ahead of a very big day that is quickly approaching: the April 2021 deadline to upgrade payment equipment at automated fuel dispensers (AFDs) to become EMV-capable. Once this deadline passes, full liability shifts to the party in the payment chain with the least secure payment technology.

Failing to upgrade equipment ahead of this deadline can result in fraud liability costs that aren’t exactly pocket change. As retailers plan their 2021 budgets, doesn’t it make sense to put a dollar amount on these potential costs, should they have to shoulder the entire burden?

Fortunately, retailers have a new tool at their disposal that can do exactly that.

Putting a Dollar Amount on the Cost of the Liability Shift

Mercator Advisory Group, a global payments industry advisor, created a free calculator to estimate the costs of the liability shift that retailers can use to estimate their own potential costs based on their business information.

The model was built around certain facts (e.g., average losses, risk of site location); straightforward assumptions (e.g., variable losses, factors contributing to a loss beyond fuel); and reasonable conclusions, such as combined risk factors, time and a first-year liability estimate.

The headline news: Increased liability following the deadline will result in mounting costs for retailers, with monthly losses stemming from chargeback fees, product loss and network non-compliance assessment fees.

Here’s an example of those costs: The average cumulative liability shift of EMV at the forecourt over a 12-month period, for a retailer with 12 locations evenly spread across low-, medium- and high-risk areas, is estimated to be $207,783 total, or $17,315 per site.

This amount could change dramatically depending on the risk position of each station. In fact, because Mercator applied a lower loss rate than existing analyses as its starting point to high-risk locations, and then decreased the loss rate even more for lower-risk locations, its analysis takes a notably conservative view of the liability risk.

This calculator should be considered a critical tool for planning next year’s budget for fuel and convenience retailers who don’t plan to upgrade their AFD equipment soon, because the AFD upgrades will cost you money — but so will full liability.

 

Dan Lyman is Head of Payments Market for North America. In his role he identifies and drives all sales and business activity within his region and contributes to global strategic decisions alongside his European and Asian counterparts, and the wider TNS corporate leadership team.

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