A tie-up between global payment
processor First Data and fuel giant Shell is aiming to convert
card-wary consumers to a new type of fuel card that acts as an
electronic cheque and applies discounts on fuel purchases in
real-time directly at the point of sale. Charles
Davis
reports on the new proposition.

First Data wants to take a host of retail categories and convert
them to e-cheque through its newest line of electronic cheque
payment products. Its first major tie-up with Shell Oil Products in
the US is a perfect example of what Tim Horton, vice-president of
business development at First Data, sees as a real opportunity for
the company.

“There are a number of applications for this product in
retailers with repeat customers who currently generate a high
number of debit transactions but have no tie to the loyalty
function of the merchant,” Horton said. “If you think about the
merchant locations where you might have a loyalty card, or a
keyfob, and yet you still use your bank debit card to complete the
transaction, the merchant is missing an opportunity there.”

The Shell Saver card is the first gasoline retailer proposition
to make an electronic cheque payment method available to consumers
nationally. It provides consumers with a way to pay for purchases
with a direct link to a chequeing account and motivates the
cardholder by offering a saving of $0.05 on each gallon of fuel
pumped at Shell stations. The discount will be deducted before the
purchase hits the customer’s bank account, but the pump receipt
continues to register the full amount, as well as displaying the
savings to the consumer.

A non-credit payment product issued to consumers directly from
Shell, the Shell Saver card has no application or annual fees.
Horton said that the product appeals to consumers who do not want
to use their bank debit card at the point of sale and also are
increasingly unwilling to use a credit card.

A new type of loyalty relationship

“Many of those customers would have used a cheque in the past,
so now instead we can use the debit rail we already have with Shell
to electronify that transaction and send it along for processing
just like an e-cheque or debit transaction,” Horton said. “The
customer can pay at the pump, not enter any bank information, and
be on their way, and they are now enjoying the benefits of a
loyalty relationship with Shell.”

Consumers who want the magnetic-stripe Saver card will get a
blank card at a Shell station and activate it after going through
the application process on the web or by entering personal
information at some Shell stations that will have readers equipped
to handle the enrolment process. To qualify for a Shell Saver card,
customers must have an active chequeing account in good standing,
the company stated. Among the data to be entered are the
applicant’s chequeing account and bank-routing numbers as well as a
four-digit personal identification number, Hudson said.

For Shell, the card represents a way to lock in debit customers
that were paying for gas without leaving a trace of a relationship
with the company, while also saving as much as 50 percent of the
cost of accepting credit cards.

Until now, PIN debit cards for petroleum and convenience store
retailers have been the domain of some regional chains working with
Tempo Payments, a specialist in debit alternatives to the major
card brands.

The card’s purpose is to offer Shell’s owned-and-operated
stations and retailers a lower-cost payment method than third-party
credit cards, and to give consumers another Shell-branded payment
card option, according to Horton.

Diversity of fuel card market

Since the Shell card links to a consumer’s chequeing account,
the approval rate is around 98 percent, compared to 30-35 percent
approval rates for credit cards – a staggering number and one that
reflects the diversity of the petrol market for cards.

Shell will charge petrol stations a flat $0.40 per transaction,
a huge saving over credit transactions. MasterCard and Visa
recently capped signature-based debit card interchange rates at
$0.95 per transaction for fuel purchases, and MasterCard has a
similar cap on credit card rates. Shell has more than 12,500
marketer-operated branded locations in the US, so the potential
savings are substantial.

“The most significant factor driving e-cheque are the merchant
service fees,” Hudson said. “This is a great opportunity to give
people who don’t qualify for one of the other Shell credit cards a
payment option. Then, when those people are eligible, we can
upgrade them to a credit card. There are also other customers who
just don’t want to use their credit cards anymore.”

The automated clearing house (ACH) transactions clear in a few
days. Unlike a debit transaction, no hold on funds is placed on the
cardholder’s account at the time of the sale. Based on results of a
2007 biometric e-cheque pilot, Shell expects to see as much as a 40
percent increase in customer loyalty among cardholders.

Today, approximately 10 percent of Shell’s wholesalers and
retailers’ sites offer Shell Rewards, a loyalty programme that
serves as the foundation of Shell’s promotions. Loyal customers are
identified by any credit card used and are offered promotions such
as instant gasoline price rollbacks, car wash discounts, free cups
of coffee or other receipt-based deals. Customers accept the offer
via the pump’s PIN pad, but currently, the promotions are
communicated through pumps equipped with a 4-by-5-inch screen.

Horton said that the Shell Saver card allows Shell to attract
greater numbers of new loyalty customers. “If they are using their
bank debit cards at the point of sale, then driving away, Shell
loses that loyalty opportunity,” he said.

Horton said that First Data already is moving into the grocery
and pharmacy sectors with the e-cheque product as well.

“Any market where you have a lot of repeat business, we see a
place for this product,” he said. “Anywhere you already have a
loyalty application, like a grocery store keyfob, we can convert
that into a payments-ready device. We see lots of opportunity for
that in grocery and pharmacy and wholesaler retail locations.”