Shell Seeks to Cut Acceptance Costs, Pump Up Loyalty With ACH Card

In what it calls a first for a major oil company, the U.S. subsidiary of Royal Dutch Shell plc in January plans to offer a PIN-based consumer debit card that uses the automated clearing house network, gives consumers a discount on gas, and costs Shell's retail outlets 40 cents per transaction to accept. Shell claims that cost represents savings of up to 50% compared with the costs for taking non-Shell plastic. Until now, PIN-debit cards for petroleum and convenience-store retailers have been the domain of some regional chains working with Tempo Payments Inc., a specialist in debit alternatives to the major card brands (Digital Transactions News, March 7, 2007). Houston-based Shell Oil Products US says in a news release that its upcoming Shell Saver Card will make Shell “the first major gasoline retailer to nationally launch an electronic-check payment method.” The card's purpose is offer Shell's jobbers and retailers a lower-cost payment method than third-party credit cards, and to give consumers another Shell-branded payment card option, according to Elizabeth Hudson, Shell manager of U.S. consumer cards. “We wanted to drive as much merchant-service fee relief as possible,” she tells Digital Transactions News. More than most of the majors, Shell has been public about the costs of card acceptance and has lowered pricing to its 14,000 U.S. stations through other programs (Digital Transactions News, April 14). 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 enrollment process. Among the data to be entered are the applicant's checking account and bank-routing numbers as well as a four-digit personal identification number, says Hudson. In a transaction, the cardholder swipes the card and enters the PIN. Processor First Data Corp.'s TeleCheck check authorization and guarantee service routes the transaction over the ACH to debit the cardholder's registered demand-deposit account. According to a spokesperson for Greenwood Village, Colo.-based First Data, Saver card purchases are considered by NACHA, governing body of the ACH, to be point-of-sale transactions. The card will offer holders a promotional discount of 5 cents per gallon on gasoline and diesel purchases from its Jan. 5 debut until June 1; thereafter the discount will be 2 cents per gallon. Consumers also can use the card for any purchase inside Shell c-stores except lottery tickets, though discounts don't apply. With its 40-cent flat fee, Shell is positioning the card as a way for jobbers to save up to 50% on acceptance costs for third-party cards, particularly credit cards. Credit and signature-based debit card acceptance pricing has been a sore point for petroleum retailers in recent years as consumers switched from cash to cards for gas purchases and fuel costs skyrocketed, cutting into their margins, although they've gotten some relief this fall with the plunge in oil prices. Both Visa and MasterCard have capped signature-based debit interchange rates for gas purchases at 95 cents; MasterCard also has put in a similar cap for most credit card gas purchases. The new Saver card, however, will cost Shell jobbers more to accept than the Citigroup Inc.-issued Shell private-label and cobrand MasterCard cards. Shell Oil Products absorbs the acceptance costs of those cards. And, depending on the EFT network and transaction volumes, interchange for PIN-based debit cards can be less than 40 cents. But if it works as intended, the Saver card will lower Shell stations' costs if it diverts volume that otherwise would go onto credit and signature debit cards from issuers other than Citi. The card also will expand Shell's card deck that includes the 12 million Citi-issued Shell consumer and fleet cards, as well as prepaid cards. “There is a segment of our population that can't get the cards issued by Citi, or doesn't want them,” says Hudson. “By design we wanted this card to be incredibly easy to get.” Hudson won't say how many Saver cards Shell expects to issue. She also wouldn't say how much influence Tempo had on the configuration of Shell's upcoming product, but offers, “We looked at every available model known and in existence.” The company said a 2007 test of ACH-based payments helped boost customer loyalty by 40% in the user group. Shell Oil Products US serves about 6,000 stations in the company's Shell Downstream unit that operates in Western states and 8,000 stations in Eastern states affiliated with Motiva Enterprises LLC, a 50-50 joint venture of Shell Oil and Saudi Refining Inc.