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First Data Corp. will manage a closed-loop PIN-debit card for Shell Oil Products US and Motiva Enterprises LLC, which operate 14,200 branded Shell gasoline stations nationwide. The company will process the card transactions over the automated clearinghouse network.
The deal represents First Data's biggest to date since it began offering comprehensive card-management services three years ago, a top executive says.
Houston-based Shell Oil Products, a subsidiary of Shell Oil Co., and Motiva, a joint venture between Shell and Saudi Refining Inc., will begin offering the Shell $aver card to motorists in January, Elizabeth Hudson, manager for Shell U.S. Consumer Cards, tells ATM&Debit News.
Motiva, which also is based in Houston, operates 8,100 service stations along the East Coast, and Shell Oil Products operates 6,100 services stations on the West Coast and Midwest.
Cardholders, who can use their cards only at Shell gas pumps and inside Shell stores, will enter a PIN at the terminal to authorize transactions, Hudson says. TeleCheck, which First Data owns, will handle the card authorizations. First Data will batch the transactions and process them over Connectpay, First Data's ACH network.
The $aver card offers up to a 50% merchant service fee savings per transaction compared with costs to accept third-party credit cards, Shell says. Shell wholesalers and retailers saw customer loyalty increase by as much as 40% through customer conversions to this payment method during the pilot, the company adds.
Tim Horton, First Data vice president of product development, says in some instances Shell dealers will receive their payment the next day. Otherwise, it may take up to three days.
When Shell makes the card available, motorists can apply for it online or pick up an application at any participating Shell station. Shell first tested the ACH debit card in November 2007 at a Shell station in Chicago after a biometric payment program ended when San Francisco-based vendor Pay By Touch filed for bankruptcy, Hudson says. The oil company is marketing the card to consumers who would not qualify for its Shell Platinum MasterCard, she says.
Indeed, motorists who do not qualify for its Shell Platinum MasterCard are an untapped market, Hudson explains. "Only 35% of credit card applications are approved, so there is a substantial market out there," she says.
The Shell $aver card also may appeal to motorists who would qualify for the Shell MasterCard but who might prefer using a debit card instead, Horton believes.
He is on the mark, according to a recent study by Javelin Strategy & Research in Pleasanton, Calif.
Because of the tightening credit market, consumers are moving to "debit and other cash-based alternative-payment methods," Javelin concluded in its study, "Online Retail Payments Forecast: Market factors square credit cards against alternative-Both Bank and Non-Network." Javelin released the 42-page report this month.
Issuers offering cards that process transactions over the ACH network are not new, explains Adil Moussa, an analyst with Boston-based Aite Group.
Tempo Payments Inc. of San Mateo, Calif., and Capital One Financial Corp. of McLean, Va., are two of the more-recent examples of companies that offer cards that process over the ACH network.
The public historically has been lukewarm to the concept.
Cap One, for example, recently withdrew its decoupled debit card test so the issuer could do some fine-tuning.
And up to this point, issuers have not offered compelling incentives for potential applicants to apply for the cards, Moussa says. "[Card issuers] want the applicant's name, address, Social Security number and bank- routing number, and the card issuer is not even their bank," he says. "The incentives have to be compelling."
Shell, however, may have tapped into an enthusiastic buying public with its $aver card, Moussa says.
Though gasoline prices have dropped recently, drivers who apply for and receive the $aver card temporarily will be rewarded with a 5-cents-per-gallon discount on gasoline and diesel-fuel purchases until June 1. Shell will give motorists a 2-cents-per-gallon discount thereafter, Hudson says.
Shell's 5-cents-per gallon discount is a strong incentive for motorists who are keeping a tight rein on their pocketbooks to apply for the card, Moussa says. The 2-cents-per-gallon discount, however, makes more financial sense for Shell.
"The only way incentives work is that the cardholder considers them to be something of value," Moussa says.
First Data has offered for the past three years to manage card programs for other companies on an outsourced basis.
"This is our biggest national launch so far," Horton says. ATM
