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Are Alternative Payment Methods the Future of Fuel and C-Store Payments?

 Alternative Payment Methods the Future of Fuel 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.

 

Read the other posts in this series or visit our fuel and convenience page to learn more about enabling digital transformation through an agile payments platform.