When it comes to electronic payment systems, convenience and petroleum retailers have a definite need for speed. “You want to get people out of the lines as fast as possible,” said Rick Oglesby, senior analyst with Aite Group, a Boston-based research firm specializing in the financial services industry. “That’s what makes convenience stores so appealing.”
But security issues and changing technology could threaten to slow payments down at retail, while society’s mobile-centric behavior is increasing the demand for easy, immediate gratification.
Thanks to the breach of an estimated 40 million credit and debit cards at Target Corp. stores last fall, the hot topic is EMV chip card technology. Named for Europay, MasterCard and Visa, the card contains a microprocessor chip instead of a magnetic stripe. “It’s much more difficult to counterfeit,” Oglesby said, “and they require a PIN number, even for credit cards, which provides greater security.”
Since the card stays in the machine and users must remember a PIN, EMV cards could change the customer experience adding a learning curve and time to the transaction, said Mike O’Connor, manager of programs and brand image for Houston-based Phillips 66, which has 7,000-plus locations branded Phillips 66, Conoco and 76. Employees, too, must adjust to the process, presenting yet another learning curve and initial slow down. The cost to replace, upgrade or augment EPS systems, meanwhile, isn’t cheap, particularly for stores with a plethora of pumps. “It can be difficult for a convenience store to justify the financial benefit,” O’Connor said.
Already Phillips 66 must support more than one EPS manufacturer on behalf of the marketers through which it operates.
Costs Could Rise
But c-stores may have to pay to play. Mastercard and Visa have set October 2015 as the deadline for retailers to switch and October 2017 for petroleum merchants. There’s incentive to change sooner. The question of who pays for fraud—the retailer or the bank—could boil down to the party with the least secure setup, Oglesby said. “If a merchant card gets used fraudulently and it only has a magnetic stripe, then the merchant might pay for the fraud.”
The good news: Merchants with proprietary cards can use the chip to carry loyalty information, although typically that’s not the way the technology has been used in Europe, where it’s the standard.
Proprietary cards have other benefits. Phillips 66 has a personal and commercial credit card issued by GE Capital and a proprietary fleet card through Wright Express. “These cards provide customers with incentives and help build loyalty,” O’Connor said. “Reduced transactions fees are an additional benefit.”
Despite the Durbin legislation that limits debit fees, fees in general continue to be a concern, he added. Phillips 66 is a member of the Merchant Customer Exchange, a group of the nation’s leading merchants, which want to offer consumers an integrated mobile-commerce platform.
There are clear advantages. If a customer is paying via phone, “you know where their eyeballs are,” Oglesby said. You can push alerts to them regarding deals inside the store. You can also track customer information. “ ◆
New Payment Systems Catching On
U.S. customers overwhelmingly pay for e-commerce goods and services using a debit or credit card: 71.5% of transactions are completed in this way, according to a report on alternative payment systems by WorldPay. E-wallets are now a significant method of payment, accounting for 17.6% of all retail transactions. PayPal, unsurprisingly, accounts for the bulk of those payments at 16.2%; Google Wallet is a distant second with 0.7% of transactions. Mobile devices are used to complete 1.2% of payments, with mobile wallets being used for 0.7% of those and direct carrier billing making up 0.5% of the total.