Independent gas stations are a huge market opportunity. However, sales reps are driving past, maybe even buying gas, at these businesses every day without ever inquiring about their merchant services needs.
There are about 60,000 independent gas stations in the U.S. A significant number of these businesses don’t even have EMV compliant self-service pumps. If you ask owners why, most will explain that it costs too much to reconfigure their pumps.
What these businesses need is a solution set that cushions the financial blow of EMV compliance and actually improves their profit margins.
Gas POS, the sponsor of this Merchant Sales Insight, offers a solution set that meets these objectives. Our sponsor is looking for merchant services sales reps who want to share in the residual streams created when their technology set is coupled with Cash Discounting.
“We are looking for agents who can go into these gas stations and get the conversation started,” says Gas POS President, Josh Smith. “Our experts can handle everything else.”
Gas POS is a registered payments facilitator (PayFac). They control the entire merchant ecosystem – from processing and settlement to billing and customer service.
Let’s examine the market opportunity. Also, learn how Gas POS helps agents drive savings for independent gas stations and create new residual streams.
EMV Compliance Costs Staggeringly High
Four out of ten gas stations in the U.S. are independently owned and operated. They don’t get any marketing help or pricing concessions from the big national/international brands. Two of the biggest challenges these gas stations face are –
- the need to bring their pump-based terminals into compliance with EMV security requirements.
- the impact of card processing fees on their profit margins.
EMV is an international standard for securing credit and debit card data through the use of chips embedded in the cards. Most businesses were required to have chip reading POS devices in place by 2015. However, because of the extensive changes necessary for automated fuel dispensers (AFDs), gas stations were given an additional six years to comply.
The price of noncompliance is high, too. Noncomplying businesses face financial liability for any fraudulent card transactions related to a non-chip-reading device. Some processors also assess noncompliance fees on these gas stations, in addition to higher switch fees.
EMV compliance for AFDs is no easy undertaking – it involves a lot of moving parts. Noncompliant pumps typically need to be ripped out and replaced, along with in-ground tanks. Then there are software and networking costs that are unique to gas stations with inside and outside sales.
- The all-in price of compliance for a two-island gas station with four separate pumps can exceed $80,000, by most estimates.
- Plus, business owners lose revenues during the days or weeks of installation downtime.
- The installation of new pumps and underground tanks requires specialists who understand and can support compliance with various state and federal requirements around gas dispensing. And frankly, demand for these experts often outstrips supply.
While most brand-owned and affiliated gas stations managed to get EMV-compliant AFDs in place by 2021, perhaps as many as 50,000 Independent stations still remain noncompliant. Thus, in addition to paying more to processors, these businesses have become easy targets for fraud.
Fraud is like water; it flows to the path of least resistance. The tens of thousands of AFDs that still read mag stripe readers to support card sales have become a path of least resistance for fraudsters. For example, there have been reports of organized gangs using stolen and cloned credit and debit cards to fill up large tanks of gasoline for resale on the black market.
So, clearly, there is an urgent need for these independent gas stations to bring their AFDs into compliance with EMV. But the costs and implementation hurdles are overwhelming to many. There HAS to be a better way, and there IS: Gas POS helps independent gas stations convert AFDs to read EMV chips. They have seen great success with these businesses for several years.
Processing Fees Eat into Already Slim Margins
Independent gas stations possibly have more to gain from Cash Discounting than any other type of business. These businesses already operate on thin margins. Card processing fees are their second biggest expense, next to employee salaries.
Margins on fuel sales typically run under 5%. Given the slim margins on gas sales, these businesses look to inside sales to drive revenues.
According to one estimate, independent gas stations generate about $600 billion in yearly sales, for which they pay an estimated $15 billion in card processing fees. And they see only about $10 billion in profits. That’s right: processing fees exceed profits at independent gas stations by 50%!
Eliminating this expensive line item from their balance sheets is a high priority for these businesses. Cash Discounting addresses this need. For a gas station processing $750,000 a year in sales, Cash Discounting translates to $20,000 a year in savings.
Discounts for cash payments is not a novel idea for gas station owners. In fact, gas stations were the first to offer lower pricing to cash paying customers. As far back as the 1980s, gas station owners adopted this strategy in the face of spiraling fuel costs.
There has long been a disconnect between outside fuel sales and inside sales at gas stations, with different POS systems required for each. This adds to the complexity of building a compliant Cash Discounting program for all products sold, inside as well as outside.
Adding to the complexity, there are all types of federal and state regulations around how prices need to be displayed and calculated. And there are limitations on which items can be discounted. Some states, for example, prohibit discounts on tobacco and alcohol products. No states allow lottery tickets to be discounted.
Gas POS Can Eliminate Costs and Improve Margins
Gas POS offers a solution designed to meet the specific requirements of independent gas stations, with considerations of the various government requirements for advertising, discounting, and selling regulated products. Since Smith’s grandparents were independent gas station owners, he and his team of experts offer a culmination of years of technology building.
Gas POS has thought of everything! They work with contractors who understand the nuances of installing AFDs, in-store POS systems, and the required inter-connectivity.
The high cost and prolonged downtime of bringing AFDs into EMV compliance is addressed by providing equipment and associated software as a service, with frictionless installation. Gas stations that qualify can receive EMV upgrade kits for existing pumps, or entire EMV-compliant fuel dispensers. There are no upfront charges. Gas station clients pay a monthly fee for the length of the contract. With 10-year terms, the contracts make for sticky clients and long-term agent residual guarantees.
The Gas POS monthly fees are modest and more than covered by the payment processing cost savings from the Gas POS Cash Discounting program. Gas station owners can implement cash discounting by fuel dispenser, as well as by department/product category. And Gas POS terminals feature customer-facing displays that break down cash discounts for each item in a basket of goods, making everything transparent to customers.
A Wide-Open & Ready Opportunity
I don’t know many merchant services sales reps who have built their portfolios on independent gas stations. Considering the complexities, that is understandable. Agents can’t walk in and pitch the same EMV-compliant POS devices and Cash Discounting programs offered to other business types.There are a lot of moving parts – tricky regulatory, integration, and implementation considerations. And, of course, there are big cost barriers.
So, imagine offering independent gas stations a payment processing solution that addresses the novel technology and regulatory requirements they face, even including the cost barriers. And the solution actually improves the business’s bottom line!
Gas POS has a cloud-based solution that addresses all the needs and requirements of integrated POS devices and payment processing for independent gas stations. Equipment is EMV compliant and requires no upfront investment by the gas station owner. Think of the equipment and necessary software as a service.
When you work with a company that understands the gas station market and has a solution set that addresses the unique needs of the market, selling EMV compliant terminals and Cash Discounting becomes as easy as selling any other retail business.
Gas POS offers competitive revenue shares to sales reps who help sign these gas stations. The 10-year equipment and software contracts create a sticky proposition.
If your objective is to build a strong, attrition-proof portfolio, stop driving past these gas stations on your way to another cold call! Walk in and start a conversation with owners instead. I bet that if you offer them the opportunity to slash costs with EMV compliance and Cash Discounting, without any upfront investment, you will find them eager to make the switch to Gas POS.