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US petroleum retail industry opportunities in 2019

Our latest whitepaper examines the key questions that independent gas stations need to consider in order to thrive as the US petroleum landscape evolves in the next 12 months

Things are looking up for US gas stations. In 2018, vehicle registrations hit 276 million — up 6 million from 2017. And that number is set to rise to 281 million in 2019, largely thanks to the country’s continued economic health and an employment boom. Commercial vehicles and individuals are racking up more miles too.

Clearly, 2019 is shaping up to be a year full of opportunities. And not just for the big chains. Independent gas stations will benefit too.

That said, if the independents are to catch the wave, they must first come to grips with the shifting payments landscape and customers’ changing needs and expectations.

In our latest whitepaper, we’ve had a look at the main challenges independent gas stations face when it comes to payments and how ISOs can support them along the way. Here’s what we found out.

Getting to grips with EMV

Card fraud remains a pervasive problem in the US. When we interviewed consumers for our 2018 Lost in Transaction report, 34% told us they’d been victims of fraud, with the average loss clocking in at $303. In 2018 alone, 60 million cards were compromised.

There are two main reasons why card fraud is still so prevalent. Firstly, many customers still use their card’s magstripe, often because EMV-enabled card readers aren’t available. Secondly, skimming is on the rise.

The shift to EMV-enabled terminals, the deadline for which is currently scheduled to be October 2020, has been hugely challenging for independent gas stations due to the cost, a dearth of skilled installation technicians and problems integrating with ‘at the pump’ terminals’ legacy infrastructure. The latter issue is especially problematic, seeing as 72% of Americans prefer to pay at the pump. Because the challenge is so great, preparations are already underway to meet the deadline.

These implementation challenges have also meant that skimming — stealing card details via hardware attached to payment terminals — has grown at an alarming rate. This has become such an extensive issue that last Thanksgiving the US Secret Service launched ‘Operation Deep Impact’ to tackle credit card skimming devices (following similar smaller initiatives on Memorial Day, Independence Day, and Labor Day); before the end of the month over 200 skimming devices had been found and an estimated $6m of fraud had been prevented.

With individual merchants now starting to gain reputations for their susceptibility to fraud, independents who don’t switch to EMV face the real risk of reputational harm. As a result, ISOs can expect an uptick in requests for help making the change, especially from smaller independents.

Going cashless

While cash is still a force to be reckoned with when it comes to payments, alternative payment methods are hot on its heels. The average American now carries $42 in cash — $8 less than they did in 2017. And a majority expect to carry less in two years’ time.

By contrast, the popularity of alternative payment methods is on the rise. Our latest Lost in Transaction data found that 61% of US consumers prefer to shop in places that accept contactless. And with two in every five cards expected to be contactless-enabled by 2021, appetite for the technology — as well as technologies such as mobile payments — can only continue to grow.

Merchants, including gas station owners, are keen to satisfy the demand. 23% plan to start accepting contactless within the next two years. And a further 33% plan to start taking mobile wallet payments, which will increase acceptance to 62%.

Given that implementing the two technologies comes with similar challenges, independents may find that upgrading to EMV and contactless-enabled technology at the same time will be more cost-effective.

To surcharge, or not to surcharge?

With gas stations earning as little as 25 cents per gallon of fuel, surcharges on credit card payments are often a matter of survival. At the same time, discounts are often applied to cash payments in order to incentivize them.

The flipside is that surcharges are far from well-received, especially by younger generations accustomed to cashless payments. Even amongst older generations, our research shows consumers feel increasingly confident using their preferred method to pay. And they’re taking less and less kindly to being forced to use one payment method over another.

To cloud the waters further, 10 states and Puerto Rico currently ban surcharging. And another 17 states are considering similar bans. With this in mind, it’s time for independent gas stations to start looking at alternative solutions that’ll keep consumers happy while preserving their razor-thin profit margins. And, here again, ISOs can provide invaluable support and advice.

Raising the margins: the fleet card boom

With fleet operators increasingly looking to keep costs in check, fleet card usage is skyrocketing. By 2022, the fleet card industry will be worth an estimated $11.7 billion and North America will be the second largest market.

Getting in on the action has clear benefits for independent gas stations. Accepting fuel cards means being able to service commercial drivers, which would boost revenue by broadening their customer base and creating opportunities for repeat business.

But in order to do this, partnering up with a payment services provider that can facilitate the process and take the sting out of infrastructural implementation will be crucial.

In summary

With the economy booming and customer demand soaring, 2019 is replete with opportunities for independent gas stations. But in order to make the most of them, they’ll need to evolve and adapt.

Fighting fraud, empowering consumers and giving them more payment choices at the pump will be crucial differentiating factors. And the advice and support of ISOs will be invaluable if they’re to overcome these challenges successfully and cost-effectively.

Want more insights on how ISOs can help gas stations catch the wave in 2019 and beyond? Download our white paper US independent gas station retailers: Payments and the opportunities for growth in 2019