Convenience store and gas station operator Mapco is using PayPal-funded mobile payments to keep motorists from straying to competitors' gas pumps.
"Kroger has picked up fueling, as well as Home Depot, Walmart and Costco. They all have fuel," said Howard Curtis, director of marketing and CRM for Mapco. "We have to focus on what we do, which is getting people in and out of our stores quickly and mobile payment for gas is part of that."
Mapco, which operates 373 stores in the Southeast U.S., is taking its mobile payment app out of beta today. PayPal will remain the exclusive payment option available for the app, which is available on iOS and Android devices.
Mapco and PayPal are trying to boost usage by offering five-cent rebate per gallon of gas purchased through the mobile app. Based on current fuel prices and estimates of gas usage, Mapco predicts the rebate could save users about $100 per year.
It's a strategy merchants have used before to convince motorists to use cheaper payment options to buy fuel. For example, Royal Dutch Shell PLC's decoupled debit card, introduced in 2009, offers a two-cent discount per gallon.
To pay for gas at Mapco, consumers download the app and click a button to connect to PayPal. The smartphone's embedded geolocation technology recognizes the pump number and store. The user then enters the amount and type of gas, and whether to add a car wash. Hitting "pump" enables fueling. The app's interface also provides information on rewards.
"This is more convenient because it takes the same or less time at the pump, and you can do it while sitting in your car," Curtis said.
During tests this spring, about 2,300 transactions were made on the Mapco app. Mobile payments would also "position" Mapco for EMV-chip card payments in the future, Curtis said. The card networks set a deadline of October 2017 for gas stations to accept EMV-chip cards, which improve security over magnetic-stripe cards. This is two years later than the deadline set for other companies.
The shift to EMV cards is not mandatory. The consequence of missing these deadlines is an increase in fraud liability, but merchants would still be able to accept swiped card payments.
"We're looking at a significant cost to replace all of our card readers and hardware at each pump. No other industry faces the kind of challenge that gas stations do for EMV," Curtis said. "Mobile is a great payment alternative whether we are updating the pump readers or not."
"I agree that to develop and app is easier and less costly than to migrate to EMV," said Zil Bareisis, a senior analyst at Celent. "To ensure that all or a majority of your customers have the app and are using it is a different matter, though."
Other gas station companies have also adopted mobile payments. In Edmonton, Alberta, AJB Software's FIPay Mobile app enables Hughes Petroleum customers to purchase gas and car washes from mobile devices.
Phillips 66, Shell and Conoco are part of the Merchant Customer Exchange mobile wallet initiative. And PayPal has also worked with fuel pump manufacturer Gilbarco Veeder-Root on tying gas and in-store payments to a digital wallet.
But gas stations must overcome the fear that using a cell phone at the pump could cause a fire. ExxonMobil stations had signs warning against this perceived danger, and it had to remove those signs last year to test its SpeedPass+ mobile payment app. The Federal Communications Commission has found no evidence that wireless phones pose a danger when used around flammable materials, ExxonMobil noted.