A Northern Michigan gas station redesigned the payment process around drivers' IDs to deter dishonest motorists that were driving off without paying for their gas.
To curtail such "drive-offs," Robert Hohn, president of Paxson Oil Co. in Saginaw, Mich., developed the Post-Pay system. Now drivers wanting to pay with cash after pumping their gas first must swipe their driver's license through a reader signaling the station attendant to activate the pump.
Obtaining driver's license data reduces lost revenue from drive-offs, and it also helps to boost revenue because those paying with cash tend to spend more than when activating pumps by prepaying with cash first, Hohn says.
"I came up with the idea when I noticed the back of a driver's license had a coded stripe on it, and I had seen a liquor store swiping the licenses through a reader to record the person's age and address prior to a sale," he says.
Paxson Oil has attached the Post-Pay device to gas pumps at two stations in Saginaw as part of a test. One station that used to suffer four drive-offs a week was down to one drive-off incident in a month — and police caught that thief with Post-Pay data.
The information provided on a driver's license barcode varies in each state, but a Michigan license provides a date of birth and a license number, Hohn says.
Drivers paying by swiping a credit card or prepaying with cash do not use the Post-Pay system. But printed directions posted on the pump alert drivers wanting to pay with cash to push a Post-Pay button to initiate the license-swiping process and authorize the clerk to turn on the pump, Hohn says.
After the customer swipes the driver's license through the Post-Pay reader located a few inches above the pump's credit card terminal, the cashier's separate Post-Pay terminal displays either an "O" or a "B." An "O" means the system has collected the driver's license data and the cashier can turn on the pump, Hohn says. When the customer comes in to the station to pay, the cashier hits "paid" on the Post-Pay terminal, and the system deletes the license data.
A "B" display alerts the cashier not to turn on the pump because the system has blacklisted the license because of a previous drive-off. If a thief uses his own or a stolen license and drives off without paying, the system stores the license information to share with police, Hohn says.
The state of Michigan allows swiping of driver's licenses as a safety precaution as long as the merchant does not keep the data, Hohn says.
Hohn would not disclose which company provided the technology for the reader, saying only the device uses software similar to a pump credit card reader. The system encrypts stored data so no one can access it after the police have received needed information, he says.
Hohn plans to distribute the device nationwide if there is demand for it. "It's really ideal for high-crime regions and for those places that have current prepay-inside options," he says.
Consumers have used a driver's license to authorize a payment or to confirm transactions in other industries.
Indeed, using a driver's license for verification or validation of a transaction has been an established practice at airports for years, but the technology has not been uniform across the country, says Julie Conroy McNelley, senior analyst and fraud expert with Boston-based Aite Group.
McNelley says she understands why Paxson Oil would consider the device necessary in its region, but she is not convinced other areas will view it as a vital technology.
"Any time you try to change consumer behavior, there has to be a compelling reason for both the consumer and merchant to want to use it," McNelley says.
Hohn says the Post-Pay system might appeal to consumers who do not like cash-prepay setups at gas stations because their prepaid amount often comes up short of filling their tanks.