A Prepaid Card That Lets Consumers Lock in Gas Prices Seeks a Network

A Miami-based startup says it signed up more than 5,000 cardholders in the first two days its service was commercially available last week in a program that allows consumers to lock in the current price of gasoline by prepaying for fuel. MyGallons LLC, which began its service last Monday after a three-month pilot, markets itself as a way for consumers to take advantage of hedging strategies normally available only to large commercial enterprises. With MyGallons, a consumer buys gas at the price prevalent in his area, loads the gallons on to a prepaid card, and then uses the PIN-protected card to fill up at participating stations, presumably saving as prices rise. But no sooner had MyGallons begun commercial operations than questions arose about its service. While the fledgling company ran a pilot involving 40 participating cardholders, it is for the time being without a transaction-processing network. On its Web site, MyGallons.com, and in its press release announcing its launch, MyGallons touted its acceptance on a fleet-fueling network called Voyager Fleet Systems Inc., a unit of US Bancorp. The company said the network gave its card acceptance at more than 95% of all gas stations in the country. But US Bancorp denies that Voyager ever had any sort of business arrangement with MyGallons. “U.S. Bank Voyager Fleet Systems does not have a contract to do business with MyGallons.com,” says a statement released by the bank. “We did not authorize the use of our name in association with this venture and we are not affiliated with this company.” Though the MyGallons site has since dropped the filling-station logos it displayed last week and now says on its home page that the company is “currently in negotiations” with another network, its FAQ page still says its card is accepted “at more than 95% of the gas stations in the U.S.” On Wedneday, the Better Business Bureau of Southeast Florida and the Carribbean, responding to news reports about MyGallons, issued a report on the company that included an “F” grade. The report says the BBB has received no complaints about MyGallons but adds that “the Bureau is concerned that the company's advertising contains a material omission of fact,” referring to the absence of a processing network. “They have no one to process transactions,” says Michael Galvin, a vice president at the bureau. “So 95% of filling stations is not true.” For his part, Steven Verona, the former software executive and self-described inventor who started MyGallons, says it is technically true that MyGallons did not have a relationship with Voyager, as its contract for the pilot was with a reseller for that network called Go Gas Universal, Wilmington, N.C.. But he says MyGallons received approvals from Voyager for the use of its network, name, and images. He says MyGallons has received marketing instructions from the network that cover such details as the placement and color of its logo on MyGallons cards. The company processed “hundreds” of transactions during its pilot, Verona says. “We're having some difficulties [with Voyager],” he says. “I don't know what's going on with them.” As a result, MyGallons is in talks with several other networks. Either of the two front runners, which Verona won't name, would improve on Voyager's 95% coverage, Verona says. A Go Gas spokesman referred a call from Digital Transactions News to US Bancorp. The startup could face competition from a local company. About 60 miles north of Miami, Boynton Beach, Fla.-based GasBankUSA is planning to introduce a similar product in the fourth quarter that will let consumers prepay for fuel at a current price and store the value in a card. The company, which is apparently affiliated with a Web-site hosting and IT company called Boca Networks.com LLC, says its card “is accepted at most of the nation's gas stations, including all the major national chains” though it doesn't say through what network the card is gaining access to these pumps. With MyGallons, consumers load value either through a credit card charge or via an automated clearing house debit to their checking accounts. The credit card option carries a $1.95 load fee. MyGallons, which relies on price-monitoring services to keep track of constantly fluctuating gas prices, uses futures contracts and other instruments to hedge prices during the two-or-three-day settlement window between the time of the prepay transaction and the time when it receives funds, says Verona, who serves as MyGallons' chief executive. In addition to the load fee, the program carries an annual membership fee of $29.95, which includes an automatic replenishment feature that adds more gallons to the card whenever the balance drops to 15 gallons. The replenishment amount can be selected by the member at sign-up and ranges from 25 to 200 gallons. Members who want to manually refill their cards pay $39.95 per year. All transactions, including prepayments for gasoline, are carried out on the Web site. Members who signed up for the pilot, Verona says, bought gas between $3.10 and $3.20 per gallon. “They're saving over $1 per gallon [right now],” he notes. If prices should drop, cardholders can buy gas with another card while they wait for them to rise again, Verona says. At the same time, a drop presents an opportunity to buy more fuel at the lower price, he adds. Owing to widespread anxiety about gas prices and given the response so far, Verona projects MyGallons could have 1 million cardholders by the end of June next year. MyGallons custom-built its authorization and settlement system, Verona says, to process transactions as they are handed off by the fleet-fueling network. The system also keeps track of individual transaction histories, which cardholders can check on the Web site, and calculates fuel prices in the zip code associated with each member's credit card billing address or home address, in the case of ACH debits. Verona says he started MyGallons as a result of his growing frustration with constantly fluctuating gas prices. “I couldn't understand why I couldn't protect myself” against rising fuel prices the way airlines do, he says.