Fleet Cards and EMV Migration

Navigator Edition: June 2014
By: David Abraham

The use cases for EMV are rapidly evolving. Numerous credit card issuers, from large national banks to local credit unions have begun offering chip cards. Debit appears to be close behind as industry players coalesce around common standards to support multiple networks on a single chip (known as a common application identifier or “AID”). Many commercial card issuers are in market with EMV products. However, within the commercial segment, few EMV options for fleet and “over the road” card products currently exist.

Because fleet cards have fundamentally different uses than other payment card types, there may be reasons to delay deploying chip cards within the segment. One of the primary drivers could be that the liability shift set by MasterCard and Visa for automatic fuel dispensers is October 2017, considerably later than the rest of the market. Moreover, fleet cards offer program administrators a high degree of control over card usage. Many are part of a closed-loop fleet network such as Comdata, EFS, Fuelman, Voyager, or WEX, which limits where cards can be swiped. Those that are part of the MasterCard or Visa network are often MCC-limited and can only be used at gas stations and, to more limited extents, repair shops and convenience stores. Such restrictive use can act as an initial layer of security for this unique card type.

Beyond location restrictions, fleet cards often require the cardholder to enter additional information into the fuel dispenser’s keypad, such as a driver or vehicle number. Depending on the fleet manager’s desired level of security, a driver can be prompted for a PIN as well. To ensure even greater control on spend, some fleet products offer the capability for an odometer reading to be entered at the gas dispenser. In some cases, the odometer reading may be required to fall into an appropriate range in order for the transaction to be authorized. Taken together, the characteristics of fleet cards make them a suboptimal target for card-present fraud.

Figure 1: Illustrative Fleet Card Control Layers
Fig-1_-Illustrative-Fleet-Card-Control-LayersSource: First Annapolis Consulting market research.

Notwithstanding the reasons above, instances may emerge where fleet providers want to offer EMV solutions. EMV can reduce instances of counterfeit card fraud because of the increased difficulty in copying the information contained on the chip. In addition, EMV may make sense for issuers that need to accommodate U.S. clients moving freight inside Canada where the liability shift for Visa and MasterCard occurred in December 2012. Furthermore, Canada’s national debit network, Interac, has mandated that fuel terminals accepting its debit scheme must accommodate EMV by December 2015. While it is not clear that magnetic stripe cards issued in the U.S. would be declined in all cases, potential interoperability issues exists.

Fleet cards remain a unique segment when considering the U.S. migration towards EMV. Because of their specific use cases, many fleet cards already contain several layers of authentication requirements. While it may be early to offer a compelling business case for EMV issuance for fleet card portfolios, several factors are emerging to consider when evaluating the merits of migrating.

For more information, please contact David Abraham, Consultant, specializing in Commercial Payments, david.abraham@firstannapolis.com.

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