Payment Trends in Convenience and Fuel Retail

An interview with Gabe Olives, Chief Information Officer, Impact 21

Delivering a consistent customer experience that delights customers and keeps them coming back depends not only on what people buy, but also how they complete the purchase. In a high-frequency retail environment like commodity and fuel retail, the focus has traditionally been on product selection, availability, merchandising and pricing. Retailers are now emphasizing the payment strategy with the aim of allowing customers to use a preferred payment method, one that the consumer deems safe and saves them time.

Make a purchase at a convenience store for gasoline or merchandise used to rely on bank-issued credit and debit cards in addition to private label credit cards issued by the retailer or its fuel supplier. Mark.

To catch up on current payment trends in the convenience and fuel industry, we caught up with Gabe Olives, CIO at Impact 21, a retail consultancy with deep roots in the convenience industry. This interview with Gabe will open your eyes to the payments innovation happening today and give you a glimpse of what the future may hold for convenience and fuel payments.

Q&A with Gabe Olives

Wise Marketer (WM): What is influencing the evolution of convenience store payments? What has changed since 2020?

Gabe Olives (GO): The most recent payment options have been heavily influenced by consumer demand based on the events of the past two years. During the pandemic, retailers have focused on serving customers in a contactless, hygienic and timely manner.

The ability to enable online ordering for pickup or delivery (mostly through third parties) has become a priority for retailers. Other e-commerce trends embraced to meet consumer demand include buy online, pick up in store (BOPIS) and home delivery (from retailer to consumer directly).

WM: What specific payment methods do you see emerging in 2022?

GO: For me, established payment formats that are gaining traction today include mobile, contactless, and wearables.

Contactless purchases are enabled using tools such as 1D (barcode representation of your PAN) and 2D (QR codes). We are also starting to see the use of 3D (holographic codes) at some retailers.

The proliferation of digital payment wallets is linked to the increased use of mobile payments. Wallets allow the consumer to add multiple preferred payment types in one portable location. Choice matters to consumers and payment wallets allow choice of payment methods

Two more are worth mentioning, one familiar and one more recent.

  • With rising fuel prices, ACH payments (offering a discounted payment method) have gained momentum. Although not a new payment method, it is a proven payment method in today’s market.
  • The whole genre of peer-to-peer payments is increasingly becoming an integral part of store operations and is expected to be more widely used in the near future.

WM: Of all these options, which one is likely to see greater adoption and growth, and which one might disappear?

GO: There really are no imposters in the group mentioned above, but clearly some will come across as easier to implement as well as more popular with customers. For any new payment method to be sustainable and mainstream, there must be a widely adopted acceptance network for this type of payment.

For example, contactless payments have been on the market for more than a decade, but they are increasingly being used by consumers. This is partly because retailers are now enabling a compatible Near Field Communication (NFC) reader with their system-wide point-of-sale (POS) equipment to enable contactless card transactions or initiated by EMV compatible mobile.

It’s not enough for retailers to request the use of a payment method, they need to ensure that the capability works properly and with similar reliability to something like the proven magnetic stripe card.

WM: Many convenience store chains accept Electronic Benefits Transfer (EBT) payments. With a large unbanked population to serve, is this something others should consider?

GO: With increasing traffic in C-stores driven by changing consumer habits, acceptance of EBT should be seriously considered. This can be accomplished through standalone terminals or through integrations with a retailer’s card processor.

The integrated route is preferred to ensure program compliance and easier reconciliation. EBT functionality has been added by most payment processors. Integration requires POS/Payment/BackOffice server support to ensure compliance with program requirements which may vary by jurisdiction. As evidence of the trend, Instacart added EBT processing as part of its omnichannel platform model in early 2022.

WM: Cryptocurrencies are used for payment in some convenience chains. Should this new option be taken seriously and should it be explored further by retailers?

GO: Crypto remains more of a novelty in the convenience industry than a mainstream form of payment. That said, Sheetz is a major retailer that introduced the ability to accept crypto for payment in conjunction with Flexa and integrated it into its store technology in partnership with NCR in 2021. Other convenience operators have introduced ATMs capable of depositing and converting physical currency into cryptocurrencies.

Whether the cryptocurrency enjoys wider adoption remains to be seen. Relatively high transaction fees that can vary depending on transaction volume and longer approval times do not compare well to established payment methods in the industry. Transaction times should be considered when partnering with vendors to ensure that transaction times are not increased which would negatively impact customer dwell times.

Take a step back from the question for a minute and realize that Crypto by design was first created as an investment vehicle rather than a means of transacting in a high frequency/low average ticket environment . The best way to illustrate this point is to ask, “Does it make sense to bring a gold bar to pay for a cup of coffee?”

WM: What do you think of the adoption of Peer to Peer (P2P) payment methods in convenience stores?

GO: Retailers should evaluate and consider adding payment methods based on consumer demand. Peer-to-peer payments have grown in popularity over the past 5 years. Initial millennial adoption has spread to Gen Xers and post-boomers.

There are many competing P2P systems in the market today, including Paypal, Venmo, Zelle, Revolut, WePay, and WhatsApp. Retailers would be wise to link to the plans with the highest volumes as a core option group, then selectively add more as customers express interest. That’s exactly what Giant Eagle did in 2021 when it became the first U.S. grocery and convenience store chain to accept Paypal and Venmo in its stores.

WM: What other new payment options are on the horizon that should be watched in the future?

GO: The priority for me is Facial recognition, holographic barcodes and “just out” methods like Amazon One. Consumer privacy trends and emerging data protection legislation will help determine which of these will become mainstream.

Take Amazon One as an example. It is a palm-based payment system already used at Amazon Go and Amazon Fresh. For consumers, it is easy to use after completing the registration process.

The travel service Clear does not appear to be tackling the convenience payment space, as it focuses more on travel, healthcare and the ticketing market (concerts, sports). It wouldn’t be surprising, however, to see facial recognition-based payments moving into this industry in the future. They entered the age verification space through pilot partnerships with sports venues.

WM: How should convenience and fuel retailers assess these payment trends and decide which payment options to adopt?

GO: Listening to customers is always a good starting point. Assessing customer demand is more important in the long run than deciding to implement a new payment method based solely on economics.

Remember that “convenience stores” are meant to be convenient. They earned this name for a reason. Payment methods should always enhance the convenience and speed of a store visit, not create slower queues by offering too many choices.

Even though the retailer may save some money on merchant fees, if the new method creates a speed bump for dealing with long queues or is simply not requested by customers, then it may not be worth – be not the investment.

Retailers should also keep an eye on adjacent retail areas. Consumers tend to expect their favorite aspects of the shopping experience to be adopted by every retailer they visit. You might call this the “Amazon Effect” because the choice, speed of delivery, and associated services that are bundled into Amazon have created an expectation of “best retail practices” for many consumers.

It may seem unfair, but we must do our best to recognize the needs and wants of our customers.

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