Digital Transactions Authoritative, insightful and timely information for payments professionals
A gas-station and convenience-store chain is proving you don’t have to sell fancy coffee concoctions to generate impressive results with a mobile app.
The program called SmartPay from Cumberland Farms, which operates nearly 600 stores in eight Northeastern states, enrolled 100,000 customers in the first 45 days after its 2013 launch—a response that surprised even the company’s staunchest optimists.
“That’s where we expected to be after six months,” David Banks, chief information officer for the Framingham, Mass.-based company, said last month at a Smart Card Alliance conference in Salt Lake City, Utah.
Responses have since slowed down, but SmartPay is still signing up 4,000 users per week. Banks said the program has accounted for 250 million gallons of gasoline so far—including a record 1 million gallons one day this winter.
With SmartPay, which uses the automated clearinghouse network and a process called decoupled debit, customers enroll a bank account that can be debited for purchases. After downloading the app, they can pull up to a pump in a Cumberland station, tap in the pump number and a PIN, and start filling their tank. The app, which works on both Apple Inc. and Android devices, relies on the phone’s geolocation technology to pinpoint the station.
The app automatically takes 10 cents off the price of each gallon, and can pass along company offers. It also allows Cumberland to track purchases for better promotional targeting. The gas discount is possible because of the ACH’s relatively low transaction cost.
“The biggest driver for us is the gas discount,” said Banks. “People will run over their grandmother to save money on gas.”
SmartPay gets processing services from ZipLine, formerly National Payment Card Association, a Coconut Creek, Fla.-based provider of decoupled-debit programs for petroleum marketers. ZipLine holds a patent on the process of funding a mobile wallet from a checking account via the ACH.
Decoupled debit is not a new concept, but it appears to be enjoying renewed popularity in niche applications. It is so-called because the issuer of the card or payment token is not the same entity that holds the customer’s demand-deposit account.
While SmartPay appears simple, it’s not. The trickiest hurdle is the enrollment process, which by design is not fast. Users must submit an application that includes their bank-account data. Cumberland tests the bank account by sending a so-called micropayment to it. The customer must report that he received that payment. “Sign-up is a little clunky,” said Banks.
But Cumberland is having more success with SmartPay now than it did with a previous version that relied on processing by PayPal Inc. The original version launched with considerable fanfare in 2012 and offered a nickel discount on gas. Despite the publicity, “that program never got widespread adoption,” said Banks. “So we went back to the drawing board.”
Asked about the lackluster result, Banks told Digital Transactions that consumers perceived the discount as anemic, so the new, ACH-based SmartPay doubled it. The disappointing response may also have reflected a relatively limited number of customers who had PayPal accounts, Banks said. By contrast, the ACH reaches virtually every consumer checking account in the country.
—John Stewart
