Get More Profit From Your Payments

In a family-owned enterprise, it's typically the third generation of family leadership that runs the business into the ground. So jokes Lynn Call, CIO of Maverik, Inc., the business founded by his grandfather Reuel in the 1920s. But Call, two of his brothers, and a cousin are on the path to do anything but let Maverik fall apart. Even in the face of a tumultuous energy market that's challenging petroleum and convenience store operators and consumers alike, Maverik is thriving. The retailer's success is due in part to its progressive approach to technology, and some of its recent initiatives at the POS have had a particularly positive affect on its bottom line.

Maverik recently adopted a payment switch solution, a technology that hasn't yet been widely embraced by the c-store market, from payment processing vendor ISD. The payment switch is essentially a suite of software products that empowers retailers to handle several pieces of the payment processing puzzle internally, as opposed to paying transaction fees to merchant banks to process payments for them. The payment switch handles authorization by routing electronic transactions of virtually any tender to designated processors, then transmits transaction data to the retailer's bank for settlement and reconciliation. Handling this step internally can save retailers significant money in terms of per-transaction fees.

Payment Switch Enables WAN, POS Upgrades
Call credits the savings realized by this move to internal, central management of Maverik's payment processing infrastructure with funding some recent initiatives. "Since we adopted the switch, the money we've saved on our credit processing cost has paid for both our satellite-based WAN and a POS upgrade to Radiant's RPOS," he says.

The retailer has been using an integrated touch screen POS package from c-store and petroleum-centric vendor Radiant Systems since 1998, and it contracts with Hughes Networks for store-to-store satellite connectivity. While some market leaders (i.e. Chevron and Mobil) have been using a satellite WAN for years to handle the transmission of payment data, Maverik takes the use of its WAN a step further. Hughes' two-way broadband service, called Direcway, allows Maverik to handle payment processing, POS reporting, gas tank monitoring, and e-mail via the satellite WAN. "We're a fairly rural company, so DSL, frame, and VPN technologies are either cost prohibitive or unavailable to many of our stores," explains Call. Boise and Salt Lake City are the sole metropolitan areas in which Maverik operates, and modern wired connectivity is sparse beyond those city limits. Hughes, which typically sells to larger enterprises than Maverik, became available through a local reseller called PacketPointe Technologies.

Maverik also runs its bad check authorization system, a proprietary credit card, a proprietary fleet fueling card, and ISD's stored-value card via the payment switch. Depending on the tender type, the switch routes the transaction to the appropriate processing application. The switch allows the retailer to manage all of these programs internally, which eliminates transaction fees. Maverik realized ROI in little more than a year and estimates it will save close to $400,000 per year thereafter with the switch in place.

Prior to the implementation of the payment switch, Maverik had a bad-check reader attached to a back room PC in each store. The reader was not integrated with the POS, which made clerk compliance difficult. If a clerk didn't swipe a check, bad checks were not identified and added to the bad-check database. "Now, the check reader is completely integrated with the POS. If 'check' is entered as the payment type, the clerk is prompted to run the check through the reader," explains Call. "This is run off the switch at the host level, which allows us to refresh our database much more efficiently."

Simultaneous Store Systems Upgrade Creates Challenges
Call says Maverik's recent technology investments happened in big-bang fashion. The upgrades to Direcway and Radiant for POS happened directly on the heels of the payment switch project. Because the project came together quickly, preproject planning was handled somewhat hastily, and the pace of the rollout suffered. "It was originally taking two installers nearly 24 hours to stage the equipment and get a single store up and running," Call laments. "We went back to the lab and set up a standard staging routine. We refined the process, and now it takes two installers 4 hours to get a store up and running, and the store is only offline for about 10 minutes." Prior to refining the staging process, stores were offline and running on electronic cash registers for up to 12 hours during installation periods. "Prestaging some of the equipment and streamlining our installation checklist were the two biggest factors that led to the time savings. By the time the rollout phase was complete in November, we were able to do three to four stores per day." Maverik found that installing stores four days per week, training clerks one day per week, and designating a day per week to handling support calls was a winning implementation formula for his IT team.

PIN-Based Debit, Stored Value, Loyalty Penetrate Petroleum
Like many fuel retailers, Maverik has been investing significant funds in upgrading its pumps to accept PIN-based debit and stored-value cards. "We had been issuing paper-based gift certificates, but electronic stored-value cards reduce fraud and increase our sales potential," says Call. Gift cards have, in fact, been shown to build retail sales significantly. ValueLink's annual random gift card study revealed that in 2005, 56% of consumers typically spent more than the face value of a gift card. PIN-based debit solutions have also allowed Maverik to explore least-cost routing software, which would allow the retailer to identify payment types that have varying levels of expense attached to them, depending on how the retailer handles the transaction. For instance, it's generally recognized that PIN-based debit is a less expensive means of payment for a retailer than signature-based debit. With least-cost routing, Maverik could identify whether a signature-based debit card also had a PIN attached to it and route the transaction accordingly in the least expensive manner.

Maverik's Adventure card transactions will also be processed through the switch. The card gives the retailer's most loyal customers a discount on their fuel, but may soon also give card-holding customers preauthorization at the pump without prepay. The program will reduce drive-off risk and POS bottlenecks for the retailer, while building the loyalty of its best customers.

Call continues to look at new payment methods as they're developed. He doesn't think a biometric fingerprint reader is either inexpensive enough or rugged enough for an outdoor pump application, but says it's likely Maverik will adopt RFID (radio frequency identification) payment at the pump and in-store POS in the not-so-distant future. With American Express building ExpressPay RFID into all of its Blue cards, growth in the adoption of RFID as a payment vehicle is likely. The benefits of RFID payment at Maverik - speed and customer convenience - are both simple and near and dear to the hearts and minds of c-store executives. "We anticipate that RFID will emerge as the front-runner of the new payment types," says Call, before briefly hesitating. "Then again," he says, "this is the payments industry. The next big trend is anybody's guess."