Are you a card Member? Alternative payment methods in the wash

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Supply and Demand

As consumers race through the checkout lines of their local coffee shops, discount centers or home improvement superstores, one buying habit stands out. The way in which people pay for goods and services has been overtaken by the 'plastic revolution'. Consumers are converting from 'cash customers' to 'card customers' in record numbers as our consumer driven economy is flooded with private label credit cards and gift cards available in nearly any denomination.

Accepting credit cards was once a luxury few businesses could afford. But in today's fast-paced marketplace businesses can no longer afford not to accept credit cards or ignore the growing population of card-carrying consumers who have made it very clear that obtaining their business is now dependent on the ability to use their cards. This shift in consumer purchasing power has pushed nearly every industry into joining the 'paying with plastic' mainstream.

Accepting Credit Cards Does Not Come Without Its Risks

As a result of credit cards being offered nearly everywhere, we, the consumers, possess a greater freedom in how and where we can spend our money. However, as the benefits for the consumer increase so do the risks associated for the businesses that accept them. Fraudulent credit card claims skyrocketed to $678 million in 2004. Nearly 80% of the claims associated with stolen credit cards and fees associated with insufficient funds could be prevented if more businesses made use of the latest in credit card clearing technologies. Some businesses within the car wash industry are now taking advantage of this new technology by using merchant processors that authorize their transactions via the web on a high-speed Internet connection. So what used to take almost 40 seconds and an additional phone line now takes 3-5 seconds.

This new way of authorizing credit card transactions also means there is no need to clear all of the transactions at the end of the day like most of the batching systems currently used in the wash industry. Not only do dealers save money on costly business phone lines that the older technologies require, but they also reduce the risks associated with accepting stolen credit cards and the bank fees associated with them.

Buyer Beware: Half-Hearted Solutions Do More Harm than Good

Car wash owners must be aware of drawbacks to any credit card solution they implement. If a wash does not currently have credit card acceptance, a common solution to implement is a credit card to token machine. On paper this solution seems to cut the cost of retrofitting existing equipment in the bays or on an entry system. It is the unforeseen costs involved with credit card fraud that have relegated this solution to a last resort. In hindsight, many owners point out that by giving thieves the ability to use a stolen credit card at a token machine, they can easily empty all the untraceable tokens without even resorting to breaking anything. Not only are the car wash operators out hundreds of dollars worth of tokens, but now the bank wants to collect money and charge back fees. Local Police claim that many times thieves sell the stolen tokens to innocent people who then redeem them for wash services. So now owners are out the cost of the tokens, liable for the charges made on the stolen card and supplying free washes that were never paid for.

There is a solution for owners and operators to protect themselves from this type of theft. Either limit the credit card purchases to a one-time service such as the use of a wash bay or be sure that your vending unit is dispensing something that can be tracked and deactivated in the event of fraud.

Offering Credit Cards Is No Longer Enough

With the rampant proliferation of credit card acceptance throughout the business world, car wash owners face a dilemma. They are forced to offer credit cards at their car washes in order to compete, but credit card theft and fraud can eat into their profit margins and cause time consuming paperwork to unsnarl.

"Visa It's Anywhere You Want to Be(TM)"

One solution to the problem and an excellent incentive to retain customers is private label credit cards. Private label cards and loyalty discounts have become one of the most successful marketing programs in the retail industry. When consumers shop at their local Best Buy or Home Depot, they are offered a myriad of discounts and promotional programs as incentives for making future purchases. Even consumers who have the money to pay for a product or service out-of-pocket will still take the time to sign up for a card to receive a discount now and pay their bill later.

The Truth Hurts

However, few car wash dealers can afford to privatize their own credit card or spend money on equipment that only provides the convenience of using a credit card at their individual car wash. The problem that nearly every operator runs into when they order a credit card acceptance system is that they don't see a huge rise in revenues to offset the cost of the system. Often times the addition of a straight credit card system only prevents an eventual loss in revenues, because other wash locations that do offer national credit cards absorb a percentage of the car washes' business.

Many operators have also noticed that a large portion of their credit card sales is from customers who would have used cash had the credit option not been available. When a wash installs a credit card system throughout a wash, it does nothing to promote loyalty, only convenience to the growing population of those who prefer to pay with a credit card.

The Solution is Simple

Enterprising car wash owners who wish to capture the business of the card-carriers and still keep them and the rest of their cash customers coming back for repeat business is to utilize the best of both worlds - alternate payment methods. Major retailers have been offering gift cards for a decade now and the sale of gift cards has risen to the top selling item in the holiday seasons of 2003 and 2004.

Nearly every person in the United States has used a gift card with a prepaid balance that could be redeemed for products and services. There are also products and equipment available within the car wash industry that can sell prepaid cards/keys/or codes through a machine that accepts both cash and credit cards. This type of system caters to both the impulse buyer and the bargain shopper by offering loyalty benefits for prepaying. These benefits can vary - bonus wash dollars or discounts on services, for example. In addition, this type of system can convert a single credit card transaction into a card or key that can now be redeemed without transaction fees or the need for cash, tokens or paper vouchers on future purchases. Many of these systems also allow the end user to add more value to their card/key/code through the same dispensing machine or even on their computers via the Internet.

Doing Your Homework: Work Smarter, Not Harder

While researching this type of credit card-compatible loyalty system, it is important to ask the following questions that may not come up in the sales pitch:

Can I deactivate a card/key/code that is fraudulently purchased with a stolen credit card?
Does the system track which card/key/code is sold with each transaction?
Is there a limit to the number of cards/keys/codes that can be in the system at any given time?
Does the system offer post-paid fleet accounts as well as pre-paid gift card sales?
How is the transaction data stored/retrieved? Is this automated or does it require on-site visits?
Is the transaction data backed up in the event of hardware failure?
Does the system batch the credit card transactions?
Does the system require additional phone lines to clear credit cards?
How much do the loyalty cards/keys cost per unit? What about customization?
How does the system handle upgrades and feature adds? Do I need to pay for these upgrades?
How flexible is the system in terms of offering discounts or running promotions?
How much development has been done to enhance the system since it launched and are there future plans to continue innovation on the product?

Alternate Payment Methods: Opportunity for Success

Many car wash owners and operators have found that the costs associated with purchasing an alternate payment program can be daunting, although the long term gains heavily outweigh the upfront costs. Some car wash owners decide that they have enough business and only wish to appeal to the one-time sales associated with credit card use at the bay. Other owners see these

Ryan Carlson is an industry expert on consumer buying trends and car wash promotional marketing technologies. Specializing in successful car wash marketing and cashless payment technologies, you can catch one of his seminars at a local trade show or read his regular editorials in the various industry trade publications. To ask Ryan for marketing advice, ask questions, or inquire about an interview, visit his website at http://www.washideas.com

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