Are Alternative Payment Methods the Future of Fuel and C-Store Payments?
Card payments are still king in many sectors, including fuel and convenience, where according to Mercator Advisory Group, 57 percent of U.S. drivers currently use a credit or debit card to pay. However, the rising adoption and associated benefits of mobile and other alternative payment methods (APMs) in many other sectors have put the topic of APMs on the radars of fuel merchants.
Tracking the trends
In a recent post, we looked at how the COVID-19 pandemic is driving fuel and convenience merchants to implement touch-free payment options. Of course, many of these initiatives are part of planned enhancements aimed at delivering a more frictionless, digital customer journey. APMs are naturally a key part of enabling these experiences, but there is an opportunity to use APMs to deliver far more benefits that support longer-term innovation and customer loyalty.
APMs, and mobile payments in particular, are on the rise around the world and the fuel segment is unlikely to be an exception to this trend. In their recent sector report on loyalty, Mercator predicted that the fuel and convenience segment would be a strong growth opportunity for mobile payment apps as a way to integrate payments, loyalty and personalized marketing offers.
Others clearly see the value in this approach. One of our major fuel merchants in Canada told us:
“It’s important that we keep pace with our ability to accept payment innovations as they arise. For instance, we expect to see mobile play an increasing role in payment transactions moving forward. A mobile app integrated with our sites would allow new customer interaction possibilities, both from a fuel and consumables perspective.”
The results of our recent EMV Readiness Survey seemed to echo this. There was a range of improvements that fuel merchants said they were looking to implement, including:
- Contactless payments – i.e. QR code, RFID (78%)
- Mobile payments (65%)
- Loyalty programs (56%)
Over 40 percent of fuel merchants also said they were considering offering more APMs.
So, what can APMs really do for fuel merchants – and how can they do this cost-effectively, especially as customer preferences evolve?
Accelerating new customer experiences
Across sectors, including retail, offering a customer’s preferred payment method has been shown to uplift the value and frequency that they spend with a merchant. As younger, digital-savvy consumers make up more of the driver population, it seems inevitable that APMs will become the expected norm.
But APMs can cater to more than just the payment preferences of mobile natives. They can also play a key role in supporting completely new customer experiences at the fuel pump. Some larger fuel merchants are already developing these innovative APM-driven customer journeys to create new points of differentiation that encourage loyalty and boost sales.
Several of our fuel merchant customers are already working on innovative services, such as the delivery of in-store items to the forecourt, using APMs and advance online ordering. Across the industry, there’s a range of mobile apps being launched by major fuel merchants that connect rewards and payment capabilities. These apps are being developed to create better experiences both in-store and at the pump that support broader payment options, such as eWallets, QR code payments and digital redemption of loyalty offers.
We’ve also been working with a customer that has deployed a mobile app utilizing a geo-fence capability, enabling customers to pre-select and pre-authorize their fuel payment on approach to the gas station.
This allows the customer to drive in and out without ever touching their wallet.
And of course, we’re now starting to see IoT come into play to deliver a digital-at-the-pump experience. One example of this is the Pay-by-Alexa functionality currently being introduced by Gilbarco and launched across thousands of ExxonMobil stations. IoT payments at the fuel station are undoubtedly a trend that will gain momentum in the coming years with vehicles tied to payment, similar to a transponder on a toll road.
Gartner has forecast that by 2023, the automotive industry will be the largest market opportunity for 5G IoT solutions, with a predicted 19 million connected car modules in use.
Delivering APM innovations
A platform approach to payments can help gas station operators quickly deploy new payment methods across their customer touchpoints without significant development costs, or the need to invest in an additional infrastructure. Payment gateways that are pre-integrated with a variety of preferred payment methods can provide the perfect opportunity for fuel merchants to expand the array of payment methods they support, as well as quickly connect to emerging APMs as they gain in popularity.
This approach can also help create a more consistent customer journey across the convenience store and at the fuel dispenser. By supporting the same payment options and enabling more innovative services, merchants can drive customers in-store to support revenue uplift.
To achieve their goals, merchants must take a holistic view of the future fuel and convenience customer journey. Getting the right building blocks in place is essential in supporting service innovation and delivering the seamless payment experiences drivers will come to expect. To not do so may mean getting left behind as other merchants drive towards a more digitally-fueled future.
Related Blog Posts
Defense in Depth: Fighting Fraud in India with a Multi-Layered Approach
There’s a quip, albeit ironic, making the rounds as forwarded emails and messages – “Who’s driving digital transformation among enterprises: CEO or CIO? The correct answer is COVID-19.” Going beyond impacting global well-being, COVID-19 is pushing the corporate world to rapidly introduce new measures for business continuity. Diametrically opposite to continuity, the black swan event of the novel coronavirus is creating disruption in terms of exploitation and fraud perpetration – especially in the banking and financial sector.
Introducing Incremental Learning: An Industry-First Boost for Fraud Prevention
In our previous blog on machine learning, we sought to clarify its role in fraud prevention for merchants. To summarize, it can be an extremely effective way to identify patterns of fraud in a manner and at a speed that humans cannot. It is a critical tool in the fight against fraud, especially when used as part of a multi-layered fraud solution.
Machine Learning: Separating Fact from Fraud Fiction for Merchants
Machine learning is a broad discipline about which many claims, sometimes extravagant, are made. In recent years, it has often been hailed as the most effective answer to stopping payments fraud.
At ACI, we’ve been working with machine learning models to prevent fraud for over two decades – and we know they can play a critical role in improving fraud detection accuracy. Here we bring together a few insights on how models can be used most effectively.
For Financial Institutions, Community Is Critical to Fighting Fraud with Machine Learning
In November 2019, our experts predicted that democratized machine learning and shared intelligence would be among the most important fraud prevention trends for financial institutions (FIs) in 2020.
Fraud Prevention Is the Frontline of Customer Experience
Digital transformation has done more than disrupt business models. In almost every consumer-focused market – and most business-to-business ones, too – it has fundamentally re-oriented the competitive landscape around customer experience as a core differentiator.
SCA: How PSPs Can Help Merchants Stay One Step Ahead
The main objective of PSD2’s Strong Customer Authentication (SCA) is to protect customers and reduce fraud by introducing new measures that ensure that customer-initiated transactions are being made by the genuine cardholder.
The EMV Deadline Has Been Extended for U.S. Fuel Merchants – Now What?
U.S. fuel stations were originally supposed to be EMV-compliant by October 2017, but due to complications and costs at the time, the deadline for EMV at the pump was extended for three years – and it has now been pushed out further to April 2021 due to the COVID-19 pandemic.
Merchant Fraud in the Age of COVID-19: We Need to Prepare Ourselves for a “Tidal Wave” of Attacks
With millions of consumers around the world self-quarantining at home, online shopping for goods, services and entertainment has become the new normal for many. A recent analysis of our own data has shown that average transaction volumes in the retail sector in March rose 74 percent compared to the same period last year.
Predicciones de fraude para el 2020: Qué esperar con la rápida evolución del panorama de pagos en América Latina
La industria de pagos en América Latina está experimentando diversos cambios en varios segmentos a medida que la población de la región está cada vez más bancarizada y comienza a usar pagos electrónicos. Aunque el efectivo sigue siendo la forma de pago dominante, los gobiernos han impulsado los pagos electrónicos a través de la regulación. Esto ha asegurado que la aceptación y el crecimiento del pago con tarjeta hayan aumentado constantemente, han aparecido bancos digitales en diferentes países y el comercio electrónico ha aumentado significativamente.
Previsões para fraudes em 2020: O que esperar com o cenário de pagamentos em rápida evolução na América Latina
As violações de dados que envolvem dados de pagamento dobraram no ano passado por várias razões - falta de inovação em segurança, prioridades corporativas equivocadas e fraquezas nos portais de desenvolvedores, para citar alguns.