Monday, June 20, 2005

Shell Squares Up to Bank Card Firms, Demands Fee Cut (


Shell is preparing to flex its market muscle with credit card firms, Oil Express learns. The company, the leading gasoline retailer in the U.S. with nearly 10% of the market, has told Visa and MasterCard that it wants to see a considerable cut in the merchant fees charged to Shell jobbers and dealers. If a reduction isn't forthcoming, the major is readying a strategy that could lower marketer costs without the co-operation of the card firms, says a senior marketing executive.
"We have been having very direct, face-to-face discussions with Visa, MasterCard and American Express over the past 60 days and we expect to see some significant relief for marketers using the Shell brand," says Shell marketing VP Hugh Cooley.

How much relief? Shell has told the firms that it believes fees should be half of what they are today, and should be based on the services the card firms actually provide, plus a small margin. That would put the number that Shell wants to see between .5% and 1%, not the 2% or more some of the card firms are charging.

"This is not something we're doing for us, but something we need to do for our marketers," Cooley told Oil Express last week. "We don't believe it is fair that they (bank card companies) should use gasoline merchants to support their other programs.

Elsewhere, notably in European Union countries and Australia, banks are held to a cost-benefit formula for setting rates, resulting in interchange rates that range from 0.5% to 0.7%. By contrast, rates in the U.S. are the highest in the world (OE 05/16).

Shell is looking for a cut in card fees within the next 60 days or so and if current negotiations yield no positive result, the major "will have to escalate to additional means to get the fees reduced.
Cooley won't discuss the additional steps that Shell might take, but admits that a number of options are on the table, including nominating certain areas of the country where the company will no longer accept one or more of the bank cards.

"People could also make a decision to litigate, but that would not be our preference," he says.
The company has already imported from Europe an individual who has spent the last three years negotiating with card firms there, and has reached out to its largest jobbers, asking them to use their political and banking connections to spread the word that card fees are a huge issue for marketers.

Shell may also step up marketing incentives for its proprietary credit card, which carries no fee at all. Currently, the company is offering consumers who apply for the card a $25 credit on their statement. The promotion should add another 35,000 new card-holders to Shell's card base by month's end, Cooley notes.

Carole Donoghue, Oil Express, Oil Price Information Service,