The Journal Gazette
 
 
Saturday, February 11, 2017 10:02 pm

No thievery at the pumps

Sherry Slater | The Journal Gazette

Mandated security upgrades that might help prevent identity theft are fueling a scramble for gas station owners’ dollars.

Petroleum Parts Inc., a Fort Wayne company, has technology designed to make payment systems more secure. But station owners have options, and even a local PPI customer found its solution elsewhere. 

PPI works with station owners to upgrade fuel pumps as technology and regulations demand. The most pressing demand now is coming from credit card issuers pushing the industry to replace or update gas pumps so they can process payments using chip-enabled credit cards.

Beginning in October 2020, liability for losses from fraudulent purchases made at pay-at-the-pump fuel dispensers will shift to gas station owners from credit card issuers.

New fuel pumps cost about $15,000 and require breaking up – and repouring – concrete to make the switch. 

Rick Byanski, PPI’s president, said his company offers a lower-cost option. Fuel station owners can pay about $5,500 for a G-6 module payment device installed by PPI in about 30 minutes.

Saving roughly $10,000 – and the cost of removal – adds up quickly when you consider that most gas stations have several pumps, he said.

Todd Lassus, president of Lassus Handy Dandy, said the local retailer operates 35 locations.

Of those, about a dozen had completed the technology upgrade by the middle of last week. The rest will transition over the next six months, he said.

Although Lassus has done business with PPI, it used Gilbarco-brand modules to plug into its existing pumps. The technology is similar to what PPI is selling, Lassus said.

Lassus invested about $750,000 to make the upgrade on more than 150 fuel dispensers, replace cash registers and swap out wiring to the pumps. The company started tackling the project three years ago before PPI was selling its product, Lassus said.

Large corporations with 100 or more stations will have to spend millions. For the more than 60 percent of owners that have only one location, the expense won’t be any easier to swallow because profit margins on fuel sales are slim.

Total cost to the industry is estimated at $4 billion, according to the National Association of Convenience Stores, an international trade association.

The 2020 deadline was set last year when Visa and MasterCard officials gave gas station owners a three-year reprieve from their original October 2017 deadline. Station owners lobbied for the extension, complaining that upgrades are expensive and compliant technology was in short supply.

Credit card issuers acquiesced. Visa noted in its announcement: "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."

As of late last year, more than 1.7 million retailers accepted chip-based transactions in more than a third of all storefronts, according to Visa officials.

PPI, which employs 46, rose from the ashes of bankrupt Tokheim Corp. in 2002. Retailers who owned Tokheim-made pumps needed someone to repair them. Three years later, PPI acquired a Minnesota business that refurbishes pumps made by Tokheim competitors Wayne and Gilbarco.

The industry’s rule of thumb is that fuel pumps should be refurbished every seven to 10 years. PPI has renovated pumps as old as 18 years.

The privately owned company doesn’t disclose revenue, but officials are expecting to double revenue in the next year and possibly triple in the coming two years due to the demand for upgrades.

The demand for pump upgrades is massive. For example, about 125,000 convenience stores sell fuel in the United States, accounting for 80 percent of fuel sold in the U.S., according to the National Association of Convenience Stores.

Terry VanGilder, PPI vice president, said the local company is "ready to go today" to meet the need.

"We’re shipping, and we’re installing," he said.

Even if customer orders start pouring in, company officials don’t expect to create many new jobs. VanGilder estimated less than five. The modules are manufactured by Invenco, a New Zealand company.

PPI officials expect a gradual transition to updated technology over the next three years as some station owners postpone the expense but others decide to get it done.

Consumers should educate themselves on which fuel stations have the latest, most secure payment technology and buy from those retailers, VanGilder said.

Byanski echoed the warning for buyers to beware.

"People make a living trying to hack these things," he said of fuel pump payment systems.

VanGilder knows PPI has to work hard to keep two steps ahead of identity thieves, who won’t stop trying to thwart the latest security upgrades.

He reminds himself with this mantra: "The crooks gotta eat, too." 

sslater@jg.net


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