Evan Schuman's StorefrontBacktalk

Given that mobile is almost certainly going to drive a lot more virtual stored value offerings throughout retail, it might be a good time to rethink how retail handles payment pre-auth holds.

Consider today’s situation: A shopper is driving to the mall to use a new giftcard she’s been sent and she pulls into a gas station en route. She says “fill ‘er up” and hands the attendant the giftcard. Given that it’s an unknown amount, the attendant keys in $100 and starts pumping. The final bill is $35, the customer gets her receipt and drives off to the mall.

When she tries to buy something at the mall, she discovers the card has been emptied and it won’t be restored for 2 to 3 days. Back in October, Visa made a change that was supposed to sharply shorten hold times, but issuers and others have not accelerated nearly enough.

Visa’s change was that it enabled acquirers and retailers to send a memo within two hours of an Automated Fuel Dispenser (AFD) transaction on the final sale amount. “These memos inform participating issuers of the final AFD transaction amounts. As a result of this enhancement, cardholders may receive more accurate balance information within minutes of purchasing fuel and have better access to funds due to more accurate holds,” Visa said.

Visa’s action is helpful, but the decision will be implemented by issuers and processors.

Hold problems today may not be daily occurrences. But with a lot of mobile-fueled stored value products coming, lobbying to get holds reduced to a few minutes after the actual transaction amount is known could prove to be a very wise move.

Who is impacted by all of this? There are two answers to that. The first are gas stations and hotels and a relatively small number of other types of merchants that have to process payment before knowing the final amount.

The second answer, though, is more useful. Under the scenario of that woman visiting the gas station while driving to the mall, the gas station people are not really impacted. They got their money and suffered no disruption. The pain is felt by the next retailer, by the merchant the shopper goes to afterward and tries—unsuccessfully—to buy something with the stored value. That retailer is deprived of the sale, possibly permanently, because that angry and embarrassed customer may not return.

Therefore, this impacts just about every retailer. Mobile is going to be pushing far more stored value type transactions—of the virtual type—and that will make these situations even more commonplace.