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The One Who Enrolls Controls


C-stores that capture the burgeoning mobile payment market will have a leg up on the competition

Convenience store consumers are looking for payment options that are secure and convenient. C-store operators are also looking for payment options that are secure and convenient — and low cost. The two goals coalesce in the form of mobile payments.

As of March 2012, smartphones had a 61-percent penetration in U.S. households, with a 78-percent penetration in the coveted 25- to 34-year-old demographic. For many young consumers who are the targets of both loyalty and decoupled debit card programs, actual cards are a deal breaker.

Widespread acceptance of a protocol for mobile payments at the gas pump and in-store promises to offer c-stores several advantages, foremost being that mobile payments can eliminate the traditional high credit card swipe fees and replace them with a low fixed cost per transaction.

“Merchants are looking for the lowest form of payment. They’re looking for decoupled mobile debit,” said Joe Randazza, president and CEO of National Payment Card Association (NPCA).

Coconut Creek, Fla.-based NPCA currently holds five patents related to processing and methods for automated clearing house (ACH)-based decoupled debit and mobile payments, all of which offer safe and secure methods for processing payments at the gas pump and/or in-store through mobile phones.

NPCA’s proprietary program is called mPay. It works on a “tokenization” concept. Once a customer has enrolled in the program and sets up an account linked to his or her checking account, an ACH-based decoupled mobile payment transaction can be made.

mPay builds a token — a pseudo account with a number differing from the number on the payment card — that exists only for a short time. mPay sends the token or authorization number to the mobile phone; the consumer enters this number at the pump or inside at the point-of-sale (POS); the POS then builds the pseudo number and transmits it to NPCA using existing communication rails. The pseudo account is converted to the real card number at the NPCA switch for validation.

In the future, this system could allow for scanning at the pump. If the pump is retrofitted to have scanners, the token can be read as a bar code. The POS never sees the consumer’s real account number. The token or authorization number is received by the consumer on the phone after the consumer authenticates with their email and PIN on the mobile app. The token lives for the life of the transaction; if too much time transpires and the transaction is not completed, the token times out.

“We’re able to demonstrate to POS companies the reason why they should develop software to enable mobile payments, to dedicate resources and develop strategies so mobile can develop traction in convenience stores and petroleum marketplaces,” Randazza explained to a group of retailers at a special NPCA roundtable meeting held in Fort Lauderdale, Fla., in late September.

“Mobile is about lifestyle spending. It’s going to happen at gas stations, supermarkets and restaurants. You’re still going to take out a credit card for a bigticket purchase. We’re not looking to replace American Express with mobile American Express. We’re looking for a low-cost alternative. We’re looking to practice our inventions,” he added.


The roundtable was led by Danilo Portal, chief information officer at NPCA. In attendance were the chief information officers (CIOs) of three companies currently utilizing programs developed in conjunction with NPCA. They were David Banks, CIO for The Cumberland Gulf Group in Framingham, Mass; Cheryl Szczesniak, CIO for The Spinx Corp. in Greenville, S.C.; and Jenny Bullard, CIO for Flash Foods Inc. in Waycross, Ga. Each CIO presented a real-world perspective of implementing a mobile payment program, including a remote on-site demonstration at a Cumberland Farms store in West Palm Beach, Fla.

Also making presentations to the roundtable attendees were representatives of VeriFone Holdings Inc., The Pinnacle Corp., Gilbarco Veeder-Root, NCR Corp. and Qualcomm Retail Solutions Inc., technology firms involved with developing mobile payment solutions, as well as Zingon LLC, which offers mobile POS marketing.

Banks discussed the mobile payment offering at Cumberland Farms Inc., the 880-plus-store Northeast convenience retailer. “In 2011, we were looking at a number of strategic initiatives: to reduce the high cost of processing credit card transactions, to develop a loyalty program and to take advantage of the exploding population of smartphones in the U.S.,” he said. “A mobile app allowed us to combine all three and pass along any savings to consumers.”

Banks noted that no other c-store company had a mobile app in those days and Cumberland Farms thought developing one wouldn’t be that hard. “While it was harder than we thought, in six months we were up and running with SmartPay using PayPal for payment. That was in March 2012,” he recalled. “In September 2012, we decided to add a second payment option (NPCA’s offline debit). SmartPay was relaunched in February 2013, backed by an aggressive marketing campaign and a 10-cent-per-gallon discount. It took off like a rocket.”

The first SmartPay launch attracted about 1 percent of the chain’s customers after nine months. The relaunch reached 10 percent in just six months, and Banks said that figure will head toward 15 percentplus next year. That would represent more than 250,000 customers.

“The relaunch also added the ability to use a magnetic swipe card and the ability to purchase inside with SmartPay. Card users get the same discount as those using the mobile app,” he explained. “We have reduced our interchange charges — they’re a small fraction of what we pay for credit cards. The more gallons we push to the app, the happier we are.”


As of September, there were only five companies in the United States offering consumers the ability to make purchases using their smartphones: coffeehouse giant Starbucks Corp. and four convenience store chains, Cumberland Farms, Spinx, Flash Foods and North Salt Lake City, Utah-based Maverik Inc. Of the c-stores, Cumberland Farms, Spinx and Flash Foods are NPCA clients.

“Since [the] Dodd-Frank [Act] was passed in 2010, only merchant-branded decoupled debit cards can offer consumers rewards. Bank debit cards can no longer offer rewards,” explained Randazza. “Cumberland Farms is one of those merchants [offering rewards] — it’s saved customers more than $1 million so far through its SmartPay system. This has addressed the intent of Dodd-Frank to pass money along to consumers.”

The consensus among the participants at the roundtable was that many types of mobile payments will be tried — like the Starbucks proprietary app — but consumers will drive the marketplace. They will decide what they are comfortable with and that will be the technology that wins.

Driving targeted marketing and enhancing loyalty programs are other important features of mobile payment programs. The programs can be designed to drive return business with targeted bounce-back coupons. In essence, mobile allows the retailer to augment traditional loyalty programs with customized development.

Like most areas of technology, the mobile payment world is rapidly changing. Even 12 months ago, no one could have predicted where things are today. Where we will be 12 months from now? What will consumers accept? The one statement that is likely to remain consistent is: Customers are mobile. Are you?

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