An Interview with Gabe Olives, Chief Information Officer, Impact 21
Delivering a consistent customer experience that delights and keeps them coming back depends not only on what people buy, but also on how they complete the purchase. In a high-frequency retail environment such as convenience and fuel retail, the focus has traditionally been on product selection, availability, merchandising, and pricing. Retailers are now fine-tuning their approach to payment strategy in an effort to let customers choose to use a preferred payment method, one that the consumer feels is secure and saves them time.
Make a purchase at a convenience store for gasoline or merchandise used to rely on credit and debit cards issued by banks, in addition to private-label credit cards issued by the retailer or its brand-name fuel supplier.
To catch up on current payment trends in fuel and convenience retail, we tracked Gabe OlivesCIO in Impact 21, a retail consultancy with deep roots in the convenience sector. This interview with Gabe will open your eyes to the payment innovation happening today and give you a hint of what the future may hold for fuel and convenience retail payments.
Q&A with Gabe Olives
Wise Marketer (WM): What’s Influencing the Change in Payments in Convenience Retail? What has changed since 2020?
Gabe Olives (GO): The newer payment options have been heavily influenced by consumer demand based on the events of the last two years. During the pandemic, retailers focused their attention on serving customers in a hygienic, contactless and time-saving way.
The ability to enable online ordering for pickup or delivery (mainly through third parties) became a priority for retailers. Other e-commerce trends adopted to meet consumer demand include online shopping, pickup in store (BOPIS), and home delivery (direct from retailer to consumer).
WM: What specific payment methods do you see emerging in 2022?
WE GO: For me, the established payment formats gaining traction today include mobile, contactless, and wearable.
Contactless shopping is enabled by tools including 1D (barcode representation of your PAN) and 2D (QR codes). We are also starting to see the use of 3D (holographic codes) at select retailers.
The proliferation of digital payment wallets is tied to the increased use of mobile payments. Wallets allow the consumer to add multiple preferred payment types in one portable location. Choice is important to consumers and payment wallets allow choice in payment methods.
Two others are worth mentioning, one familiar and one newer.
- With the rise in fuel prices, ACH payments (which offer a discount on the payment method) have gained momentum. Although this is not a new payment method, it is one that has proven longevity and strength in today’s market.
- The entire genre of peer-to-peer payments is becoming more integral to store operations and should be used more widely in the near future.
WM: Of all these options, which ones are likely to see the most adoption and growth, and which ones might go away?
WE GO: There really isn’t an impostor in the bunch mentioned above, but clearly some will emerge as easier to implement and more popular with customers. For any new payment method to be sustainable and mainstream, there must be a widely adopted network of acceptance of that type of payment.
As an example, contactless payments have been on the market for more than a decade, but are now being used more frequently by consumers. Part of this is because retailers are now enabling near-field communication (NFC) reader support on their point-of-sale (POS) equipment system-wide to enable mobile-initiated or contactless card-based transactions. EMV-capable.
It’s not enough for retailers to require the use of a payment method, they need to ensure the capability works properly and with similar reliability compared to something like the tried-and-true magstripe card.
WM: Many convenience store chains are now accepting electronic benefits transfer (EBT) food stamp payments. With a large unbanked population to serve, is this something others should consider?
WE GO: With increased traffic at C stores driven by changing consumer patterns, accepting EBT should be seriously considered. This can be achieved through stand-alone terminals or through integrations with a retailer’s card processor.
Integrated routing is preferred to ensure schedule compliance and easier reconciliation. Most payment processors have added EBT functionality. Integration requires POS/Payment Server/BackOffice 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 being used for payment in some convenience chains. Should this new option be taken seriously and should retailers explore it further?
WE GO: Crypto remains more of a novelty in the convenience store industry rather than a conventional form of payment. That said, Sheetz is a great retailer that introduced the ability to accept cryptocurrencies for payment in conjunction with Flexa and integrated it into their store technology in partnership with NCR in 2021. Other convenience operators have introduced ATMs capable of depositing and converting physical currency into cryptocurrency.
Whether the cryptocurrency enjoys wider adoption remains to be seen. Relatively high transaction fees that can vary based on transaction volume and longer timeframes for approvals don’t compare well to established payment methods in the industry. Transaction times must be taken into account when partnering with vendors to ensure that transaction times do not increase, negatively impacting customer dwell times.
Step away from the question for a minute and keep in mind that Crypto, by design, was first created as an investment vehicle rather than a means of completing transactions in a high frequency/low average ticket environment. The best way to illustrate this point is to ask yourself, “does it make sense to bring a gold bar to pay for a cup of coffee?”
WM: What do you think about the adoption of peer-to-peer (P2P) payment methods in convenience retail?
WE GO: Retailers should evaluate and consider adding payment methods based on consumer demand. Peer-to-peer payments have gained popularity in the last 5 years. Initial adoption by Millennials has spread to Generation X and post-Baby Boomers.
There are many P2P schemes competing in the market today, including Paypal, Venmo, Zelle, Revolut, WePay, and WhatsApp. Retailers would be wise to link to the highest volume plans as a core set of options and then selectively add others as customers express interest. Giant Eagle did exactly that in 2021 when it became the First US supermarket and convenience store chain to accept Paypal and Venmo in their stores.
WM: What other new payment options are on the horizon that should be watched in the future?
GO: The most important thing for me is Facial recognition, holographic barcodes, and “exit” methods like Amazon One. Trends in consumer privacy and emerging data protection legislation will help determine which of these becomes mainstream.
Drink amazon one as an example. It is a palm-based payment system that is already in use on Amazon Go and Amazon Fresh. For consumers, it is easy to use once the registration process is complete.
Travel service Clear doesn’t seem to be looking for the payments space in convenience retail, as they are more focused on the travel, healthcare and ticketing market (concerts, sports). However, it would not be a surprise if facial recognition-based payments enter this sector in the future. They have entered the age verification space through pilot partnerships with sports facilities.
WM: How should convenience and fuel retailers assess these payment trends and decide which payment options to adopt?
WE GO: Listening to customers is always a good starting point. Measuring customer demand is more important in the long run than making a decision to implement a new payment method based solely on economics.
Remember that “Convenience Stores” are meant to be convenient. They earned that name for a reason. Payment methods should always enhance the convenience and time savings of a retail visit, not create slower lines by offering too many options.
Although the retailer may save a little money on merchant fees, if the new method creates an obstacle to processing long lines or is simply not in demand by customers, then it may not be worth the investment.
Retailers should also keep an eye on adjacent retail areas. Consumers tend to build expectations that their favorite aspects of the shopping experience should be embraced by all the retailers they frequent. You could call this the “Amazon effect,” as the choice, speed of delivery, and related services that come with Amazon have created an expectation of “best retail practices” for many consumers.
It may not sound fair, but we have to do everything we can to recognize the needs and wants of our customers.