Filling Up The Retail Petroleum Market

The retail petroleum market accepts more forms of payment than any other market says Gene Pounds, senior vice president of marketing for Special Service Systems, Inc (SSS). This Tulsa, OK-based VAR should know. His company has installed payment systems for approximately 70% of the retail petroleum locations across the country. These locations include independent and company-owned gas stations, as well as convenience stores (C-stores) which also sell fuel. Special Service Systems specializes only in the payment transaction portion of the point of sale (POS) system. A petroleum retailer, for example, would call SSS to install the hardware and software needed to process credit and debit card transactions.

Adapting To Meet Market Needs
SSS, a privately-held, family-owned company, was started in 1973 by Gary Drummond, who remains president. "The company was initially founded to sell and repair manual imprinter and field asset control equipment for the petroleum industry," says Pounds. When electronic POS systems became popular in the late 1980's, SSS began selling card terminals. "Our customers asked us to do this. Even though we weren't in that particular business, we didn't turn them down. Instead, we said we could do it," says Pounds. Today, the company employs more than 70 people and is booked through the end of 1999 for installations. In response to its customers' demand for specialized payment software for their unique needs, SSS recently developed its own payment processing software, known as PetroSmart. The addition of PetroSmart is expected to increase the company's sales revenues by almost 70% over 1997 revenues.

Card-based Payment Options Increasing
Pounds explains that the development of PetroSmart resulted from a rise in the number of payment options available. These options include bank debit and credit cards (Visa, MasterCard), as well as proprietary credit cards issued by petroleum companies such as Conoco. Fleet cards are another growing payment option. These are used by companies to track fuel expenses of fleet drivers (truckers) as they travel across the United States. Wright Express and FuelMan are two popular examples of the more than 20 fleet cards currently on the market.

Electronic benefits transfer (EBT) is increasing in the retail petroleum market, says Pounds. More government programs, including WIC (Women, Infants, & Children) and food stamp programs are moving toward EBT. With EBT, payment is made directly from the government source to the retailer electronically. EBT offers greater security and faster payment for retailers. C-stores, says Pounds, are the number two redemption centers for food stamps, behind the number one grocery stores. "People without transportation will go to the local C-store to buy food using EBT," says Pounds.

Prepaid Cards Becoming A Popular Choice
"Prepaid cards are the fastest growing type of payment system used in retail petroleum," says Pounds. These are ideal for people who don't or can't use a credit card. While many people want the ease and convenience of using a credit card, not everyone qualifies for one, he says. According to one recent statistic, 54% of Americans don't qualify for a major credit card. Other people simply prefer not to use credit cards. Pounds also points out that the rise in loyalty cards has helped increased the acceptance of plastic cards in general. Many people use some type of plastic card when they shop. Pounds cites one example of why prepaid cards are gaining popularity. "Parents may be reluctant to give their children cash to use for fueling the car. With a prepaid card, parents know that only fuel can be purchased with it," says Pounds. He adds, however, that some prepaid petroleum cards can also be used to make long distance phone calls.

The Impact Of Smart Cards
Are smart cards impacting the retail petroleum market? Pounds says that SSS is helping petroleum retailers become "smart card" ready. "The application for smart cards for this market has to be determined," says Pounds. "Will the cards be used for loyalty or electronic purse or perhaps both?" One problem with smart cards in this country, says Pounds, is that most retailers aren't equipped to accept them. Some of his customers have begun using magnetic stripe readers that can also read smart cards. Many magnetic stripe cards contain a smart card chip. "They're ready to become smart cards, but we're not there yet," says Pounds.

New Product Boosts VAR's Sales
With the variety of payment systems on the market, Pounds says petroleum retailers must be equipped to handle several types. "One of our customers accepts 26 different types of payment, not including cash and checks," says Pounds. It's common for most retailers to accept from five to eight different types of card payments. The problem with accepting so many types of payment is connecting to the various payment networks. That's where SSS comes in. "We work with all the parties involved in payment processing. These include the phone companies, payment processors and financial institutions," says Pounds. SSS simplifies this process for petroleum retailers with its PetroSmart software. "It's programmed to work in a multi-host environment, where retailers are connecting to several payment processing systems," explains Pounds. "It can communicate with up to eight different hosts." In the past, retailers had to use three or four card readers to process payments using different hosts. PetroSmart eliminates the need for separate terminals, says Pounds. "In 30 to 60 seconds, we can dial up and reprogram the software for the retailer," says Pounds. "This lets the retailer shop around for faster, less expensive payment processing options."

Staying Connected In The Market
One reason SSS stays strong in the petroleum market is because of networking. "We are plugged into the petroleum market," says Pounds. For example, Pounds serves on various committees, including the International Energy Credit Association for Card Processing. This committee gathers information and helps form standards for card processing. He also sits on the task force for the powerful Independent Society of Gas Marketers - a group of 275 members that own a total of 27,000 retail petroleum locations in the U.S. "This group controls 22% of the petroleum sold in this country," says Pounds. SSS advises the group on new payment options available and participates in various trade shows for its members.

While Pounds admits SSS has grown largely through word of mouth and industry contacts, he's excited that the company has moved into software development with PetroSmart. The company also expects to become more involved with VSAT (very small aperture satellite terminal) communications for payment transactions. This will help petroleum retailers replace expensive dedicated lease lines with dual banded communications that can include voice. By continuing to explore new technology opportunities for petroleum retailers, SSS expects to retain and even grow its market share.