BP: the UK, Germany, and Switzerland go contactless

Oil giant BP is to introduce contactless payment terminals in-store at all of its service stations in the UK, Germany, and Switzerland; a total of 3,984 company- and dealer-owned sites. If the roll-out is a success, BP could take measures to lift the current E25 limit imposed on contactless payments, in order to capture a larger proportion of fuel sales, rather than just shop purchases.

Germany will see the biggest roll-out, with all 2,410 Aral sites becoming equipped with the technology, while in the UK and Switzerland, 1,174 and 400 BP sites, respectively, will also go contactless. The terminals will accept payments up to the standard maximum for contactless transactions, which is GBP15 in the UK, E25 in Germany, and CHF40 in Switzerland.

Datamonitor research has found that, on average, customers across Europe fill up with 37 liters of fuel at a time, costing approximately E40. Therefore, a large proportion of such transactions are above the ceiling imposed on contactless payments. It is therefore likely that a great deal of contactless purchases at BP sites will be for shop items rather than fuel. The payment limit, which is imposed by the banks, is due to security concerns, as no checks are made about the identity of the customer when a contactless purchase is made. For purchases above this limit, customers can still pay using their PIN or signature.

Initially, the payment terminals, which instantly process transactions when a contactless-enabled card is passed over the reader, will only accept MasterCard PayPass cards. However, Datamonitor understands that BP will shortly announce news regarding the acceptance of a rival contactless payment scheme, which is likely to be Visa. This is understandable given that in the UK and Switzerland, Visa enjoys a greater share of the total payment card market than MasterCard.

Despite being confined to the on-site store, for BP, the decision to install contactless payment technology is sound. The number of contactless cards in the markets it has chosen is on the increase, and in Germany alone, the potential for contactless payments is in excess of E47bn. Motorists will benefit from faster payment transactions and shorter queues at the point of sale, which could result in an increase in customer footfall, especially if a "fast lane" for customers making contactless purchases is introduced.

The service station channel has been gradually embracing contactless, as reflected in Orlen in Germany and Carrefour in France also offering terminals in-store. Furthermore, BP will benefit from the interchange rates (the processing fees charged to retailers) offered on contactless payments by both MasterCard and Visa, which have been reduced in order to encourage retailers to adopt the technology.

The roll-out by BP is also a good way of testing consumer sentiment at service stations toward this method of payment. If customers embrace the opportunity, BP can then consider a more radical concept: the voluntary increase of the payment ceiling in order to capture larger value fuel purchases. To do this carries a great deal of risk, and would require BP to negotiate an increase in the payment ceiling with the banks or to operate an independent closed-loop scheme, and to accept any liability for fraudulent purchases over the current limit. Although such schemes exist outside of Europe, such a move would be unprecedented within European retail; however, the benefits for BP of reduced queuing times and increased convenience for fuel-buying customers could be pronounced.