Mobile payments at the coffee shop? Starbucks has shown it is gaining traction as people order ahead to fuel up for their morning commute. Call it a fast lane for caffeination, fueling up after a fashion.
When it comes to fueling up for real (at the gas station, the drive-through that makes all the other drive-throughs possible), there’s gas in the tank to be sure, even if the engine has yet to fire on all cylinders. We’ll leave the metaphors alone for a minute, but the fact remains that mobile payments have the potential to transform the way consumers conduct commerce across all sorts of activities, including at the pump and in the convenience stores (C-Stores) that host gas stations, large and small.
According to Don Frieden, CEO of P97 Networks, there’s a roadmap ahead, where “fueling fast lanes” — used here as a noun, as in lanes where topping off the tank is done with speed — becomes a reality. That “fast lane” is a fuel dispenser that takes only mobile payments. Simple concept, but benefits abound with that simplicity. Lines get shorter. Businesses do better. More on that in a moment, though.
Frieden cautioned that “mobile payment adoption in previous years has been fairly low, and billions of dollars [were] spent trying to drive that adoption.” The key barrier to adoption, he said, has been lack of consistent acceptance of mobile payments across retailers. The consumer who attempts to pay by mobile means, but finds that a point-of-sale (POS) terminal at a given place of business does not take that payment method (or, perhaps after repeated attempts, the tech simply doesn’t work), will give up and reach for a tangible, plastic card.
As Frieden noted, integration efforts have overcome these barriers, and tailwinds exist as mobile becomes what he called “table stakes” for the continuum of fuel-based commerce, from oil companies to merchants to consumers. Awareness and adoption come through any number of avenues — from the increasing comfort of paying at the pump in the first place to mass loyalty and rewards programs, such as fuel discounts — that are on offer from fuel companies and, of course, the merchants themselves.
“The oil companies and the merchants now are able to build a relationship directly with the customer,” Frieden said. The value chain starts with the oil companies, which are the firms that primarily invest in getting mobile payments at the pump in place. After all, he noted, “it’s a zero-sum game” for the oil and gas firms that “have to get purchases over to their sites” or risk losing top lines to competitors.
Moving downstream to the merchant, the C-Store wants to convert as many sales as possible from the people who make it in from the pump to the retail setting. There’s real opportunity here, he told PYMNTS, as only 30 percent of fuel customers come into the store and make additional purchases beyond gas. The oil companies have to help these merchants in conversion efforts, Frieden noted, and this can be done through digital and omnichannel marketing campaigns, which have been proven to increase transactions as measured by “basket size.”
“To deliver this, the oil companies have to leverage the same settlement rails they use to settle ordinary payments with the merchants,” Frieden said of such initiatives, which can span promotions for, say, soft drinks, toiletries or snacks. The consumer packaged goods (CPG) firms that fund those discounts and rewards programs get value, too, as they get data back from the merchants, which allows them to better understand how and why (and even when) customers buy what they buy.
The rails may be the same, but used wisely, the top lines of several stakeholders can get a boost, Frieden noted to PYMNTS.
Mobile At The Pump
Ideally, mobile at the pump via “fast lanes” is a concept Frieden likened to setting up a toll lane that uses tags, a clearly defined lane marked with arrows to get vehicles paid up and to keep traffic moving. The adoption is one where a toll plaza starts with a single lane that takes toll tags and eventually moves to an “attendant-less” operation, where tangible cash and cards stay in drivers’ wallets.
To add to the mix, consider the airlines, where loyalty and rewards programs group customers into one, two, three and four tiers, for example. Some groups get earlier and exclusive boarding preferences or other perks.
It’s a simple, but effective, progression and goal, said Frieden, to bring payments at the pump from the realms of cash and cards to mobile. “It’s a very low-cost implementation,” he said, to put up a sign and arrows that direct users to that “fast lane” offering, where customers will eventually “clamor for pole position” as they observe the speed and ease with which payments are made and tanks are topped.
Observed behavior becomes adopted behavior. Beyond full service and self-service lies … the fastest service.
The Security Issue
In the age of skimming, it seems, no discussion of fuel-related payments is complete without the discussion of security. Here, said the executive, is where the rubber meets the proverbial road.
“The fact is that mobile is going to be more secure than dipping the credit or the debit card at the dispenser,” he said. That’s because card data is not exposed during fuel or retail transactions. There is a token generated on the phone, which passes enhanced data that includes information about the device being used, an extra layer of protection that helps determine that a transaction is legitimate as it is attempted. Frieden added that “there are a lot more checks going in at the front end, and a lot more fraud prevention tools over the mobile channels.”
Such security efforts also have benefits against the massive undertaking of upgrading fuel dispensers in the wake of EMV. Though P97 and all manner of fuel industry stakeholders support EMV (as chip cards are better than magnetic stripe cards when it comes to safeguarding data), it will take time and more than $1 billion to upgrade 1.3 million fuel dispensers across the U.S., he told PYMNTS. Without those upgrades, card transactions (with the accompanying richer data loads) can take a lot longer to complete.
“You do not want to leave any customers behind,” cautioned Frieden, who said “fueling fast lanes” are likely to see an embrace by millennials, with other demographics following rapidly in succession.
To be sure, recent research from PYMNTS, in collaboration with GasBuddy, found across a survey of more than 10,000 consumers that as many as 43 percent of high-income millennials would be more likely to visit a gas station and use mobile apps if those apps offered convenience and savings.
Convenience At The Convenience Store
As mobile gains currency, Frieden predicted, “this will transform the way consumers shop and increase the C-Store.” Any number of permutations come to bear with mobile and connected cars dovetailing for convenience at the C-Store. To illustrate, he stated there can be “pre-order, pre-pay curbside delivery … that helps consumers skip the line.” So, while fueling, a parent with kids in the car can log a purchase through the phone (or through voice) and have items delivered and placed in the trunk.
“I think that is going to move the needle in convenience,” Frieden said.