NEWS

BY MARCI GAGNON

The question of whether a fuel marketer should run a preauthorization has always been conditional . With access to updated payment technology , the great preauthorization debate is finally over . That ’ s right , fuel marketers now can run pre-authorizations and still qualify for the best rates .

For years the industry has advised against pre-authorizations unless absolutely necessary due to compliance downgrades and the resulting increase on fees . Having the ability to run pre-authorizations and still qualify for utility / emerging pricing will help fuel marketers protect against losses while also keeping costs low . To understand why this is a big leap forward on the payment side let ’ s look at the basics of pre-authorization and why they have historically been challenging for the industry .

Pre-authorizations are performed to guarantee payment for the future delivery of goods or services . For example , you have a new customer and you ’ re unsure of their payment history or tank size . Before a driver is sent out , a pre-authorization is run for $ 400.00 to ensure payment . When the driver arrives the customer only needs $ 350.00 worth of product . Here is where the fuel industry is set apart from others with respect to pre-authorizations — the authorized amount and the captured amount are almost always different . This places two actions on the card that are out of compliance with the card brands . The first being that the authorized amount and the captured amount differ ; the second being that the delta , in this case , $ 50.00 ($ 400.00- $ 350.00 ) has been authorized and held in limbo on the consumer ’ s credit card until it eventually drops off .

Until now there has been little to no incentive for credit card processors to make the necessary corrections for fuel marketers to run qualifying pre-authorizations , resulting in card brand noncompliance fees . As an example , in the case of a general consumer credit card ( AKA : MasterCard World Card ) for fuel marketers , set up correctly with utility pricing , the cost is a flat

$. 65 fee + whatever rates have been negotiated with your credit card processor . The same transaction if pre-authorized would fall victim to a compliance downgrade and cost the fuel marketer 2.95 % + $. 10 in fees for the card brand interchange alone because it now falls out of utility pricing .

Due to the noncompliance , the cost on a $ 350.00 sale becomes roughly $ 9.78 more expensive in interchange fees for the same transaction ! Remember , the only difference is that the transaction was pre-authorized and assessed a compliance downgrade fee ultimately dropping it out of utility pricing .

Now that we have uncovered why the industry has rightfully advised against pre-authorizations in the past , let ’ s talk about updated payment technology that can remove the compliance downgrades and liberate fuel marketers to pre-authorize without having additional fees .

Modern payment platforms have made the necessary updates at the authorization level . In the case of preauthorizations , an adjustment has been made to accommodate an automatic reversal during the capture process that enables the authorized and captured amounts to match . This may seem like a small change , but it has a big impact . It is the missing piece for the fuel industry . By making this update we can also send the reversal to the consumers ’ card , instantly releasing any unused funds . Since the two suspect issues have been resolved the transactions function like a straight sale — staying in compliance with the card brands and qualifying for the best rates .

Before running a pre-authorization , check with your credit card company and confirm that they have the ability to run automatic reversals on the authorized amount with the ability to release any difference back to the consumer . l FON

Marci Gagnon , vice president of strategic alliances for Qualpay , has been in the payments industry for over 15 years with a concentration on recurring billing and the energy industry . Qualpay provides processing solutions to fuel delivery and service businesses with tools designed to provide real time reconciliation and cost reduction . Gagnon can be reached at marci @ qualpay . com or visit https :// www . qualpay . com / industry / utility-and-energy

www . fueloilnews . com | FUEL OIL NEWS | FEBRUARY 2019 29