hy petroleum? Isn't it a headache to set up the stations? Why would you spend all the time it requires to get one of these accounts going smoothly? How do you approach an unbranded gas station? Agents come to me with these questions all the time.

The answer to "why" is easy - the volume. As for smoothing out the setup, it's easy if you take a proactive role in the application process.

And unbranded gas stations are just as approachable as normal retail merchants. In this article, I will cover why it makes sense to work the petroleum market. In the future, I will elaborate on other ingredients leading to success in this sphere.

I could list many reasons why you should focus on the petroleum market. However, I am going to narrow them down to three: profitability, retention and low maintenance. Really, though, there is only one expression that sums it all up: cha-ching!

Impressive profit

Yes, I said cha-ching. First, let's look at profitability. The volume in the petroleum sector is substantial. Based on our portfolio, an average gas station does approximately $65,000 in monthly volume, whereas a retail merchant does an average of $8,000.

It would take roughly eight retail merchants to equal the volume of one gas station. Sure, the profit margins are going to be a little slimmer with petroleum sales (though not always).

But think about the time spent chasing after those eight retail merchants, the wear both on your shoes and your patience - not to mention the gas you waste.

Maybe that did not get your attention. Let me put it this way: How would you like to make 12% or more of the total profit from every gallon of gasoline sold on a credit card?

Let's say you write a convenience store with gas at pass-thru plus 30 basis points and a $0.10-per-transaction fee. If your cost is $0.07 per transaction, you would be making $0.135 per transaction. Based on a $35 average ticket at $2.59 per gallon, you would be profiting about $0.01 per gallon.

Most gas station owners are making $0.05 to $0.08 per gallon in a competitive market. So, if you are making a penny per gallon on the gas purchased with credit cards, that is not a bad deal.

Rockin' retention

Next, let's look at retention. Several factors help ISOs and merchant level salespeople (MLSs) retain petroleum merchants. The biggest one is lack of competition.

Retail merchants are solicited for their credit card processing at least three to five times a month. Petroleum merchants rarely see that in a year.

ISOs and MLSs competing for retail merchants are less likely to approach gas stations, as most of them do not understand how to sell to the petroleum market segment.

In fact, only a handful of processors can actually accommodate pay-at-the-pump merchants. This means fewer ISOs processing petroleum transactions, which means fewer MLSs writing petroleum accounts.

Even ISOs that can process petroleum transactions often choose not to do so because they don't know how to support the inner workings of petroleum merchants. All of this ensures these merchants will remain loyal to those serving them, for a while at least.

Another reason the retention rate is higher with petroleum merchants is the cost involved in changing processors. Generally, pump vendors charge merchants $250 to $500 to reprogram a pump for a new processor.

Next, add in the termination fee the processor being replaced may impose, and the merchants suddenly change their minds about switching.

I know, you are wondering why merchants would switch to you, given those costs. The reason is because you are going to offer your expertise and support in petroleum. (You do not have to be the expert; you just need to partner with an expert who can make you look like one.)

Once you have obtained the business, you will be able to retain petroleum merchants by supporting them.

Also, you may have relationships with various pump vendors in your area, which can result in lower costs for pump reprogramming. Once you build your value to merchants, they will remain loyal.

Minimal maintenance

The last reason for selling petroleum is low maintenance. When everything is set up correctly, there are hardly any challenges from the processing side.

The biggest hurdle is the setup process. And this can be easily tackled if you or your ISO make sure the ISO, the pump vendor and the processor are all in sync.

Find out from the pump vendor what is required to get the reprogramming to flow as easily as possible. Then convey to the ISO the pump vendor's requirements so that the ISO can get the needed information to the vendor. This makes the process smooth. In the meantime, you look like an expert.

Once the reprogramming is completed, you are essentially done. The majority of issues hereafter are going to be pump-related.

If in the process of setting up a merchant you create a relationship with the pump vendor (and made the process smooth for him), he is more likely to send you referrals. I have made petroleum an everyday word in my office. It brings our agents revenue and loyal merchants. I hope that this article has brought you a better understanding of petroleum and that the next time someone asks, "Why petroleum?" you can say, "Long-term residual income."

I also hope this article sparks you to investigate this market further.

Dee Karawadra is the Founder, Chief Executive Officer and President of Impact PaySystem, based in Memphis, Tenn. He and his team have a wealth of knowledge on the merchant service industry, with a niche in the petroleum market. Dee's experience on the street as an agent has guided him in laying a foundation for an agent program that is both straightforward and lucrative for his agents. Contact Dee at 877-251-0778 or dee@impactpaysystem.com