Fuel Dispensing across Europe: Authorising Fuel Transactions

What is a Fuel Transaction?

A fuel purchase is, in principle, the same as any other consumer purchase: establish the amount due and then pay that amount. The differences lie in the logical order of events that make up that process, and as a consequence, there is a shift in the associated financial risks. 

In principle, they are similar, but in practice, the purchase of fuel by a consumer is not the same as the purchase of other goods.

1. Before dispensing, the final cost of the pumped fuel is not known.
2. After dispensing, it’s very difficult to return the delivered fuel back to the pump.

Whilst accepting that it’s difficult to return fuel to the pump once it has been dispensed, this risk is present across all fuel purchase transactions and only goes away if the fuel is paid for in advance.

The most common authorisation model, at least in the UK, is where the fuel is dispensed manually without pre-authorisation and then the customer heads to the kiosk to pay the cashier for the exact amount of fuel that was dispensed – only after the value of the pumped fuel is known does the merchant request authorisation and then settle for the exact amount of the fuel transaction.

Given the difficulty of returning fuel to the pump once it has been dispensed, there is a risk associated with all fuel purchase transactions that only goes away if the fuel is paid for (or ring-fenced) in advance.

What are the Fuel Authorisation Models?

Where filling stations are running a card operated, Automated Fuel Dispenser (AFD), the fuel dispensing function is authorised by the card issuer, prior to any fuel being dispensed. The Fuel Authorisation process can take one of several forms depending on region.

1. Status Check only: The merchant sends a “one unit of currency” Authorisation Request.
2. Status Check with Confirmation Advice: As above but the merchant also sends an online Confirmation Advice for the final transaction amount.
3. Estimated Authorisation with Confirmation Advice: The merchant sends an Authorisation Request for an estimated amount – in some regions, this is capped. If the final transaction amount is lower than the estimate, the merchant also sends an online Confirmation Advice for the final transaction amount.
4. Estimated Authorisation with Reversal: The merchant sends an Authorisation Request for an estimated amount and if the final transaction amount is lower, an Authorisation Partial Reversal is submitted within 24 hours and before the transaction is cleared.
5. Real-time Clearing: The merchant sends an Authorisation Request for an estimated amount, followed by a Completion Advice for the final transaction amount within 2 hours. In this case, the Completion Advice follows the same logic as a Confirmation Advice but is a full financial transaction.

How are Fuel Transactions authorised?

The general principle across Europe, which has now been adopted across the UK, is the Estimated Authorisation with Reversal model.

AFD Authorisation Request

The merchant (fuel pump operator) generates and sends an authorisation request for a “good faith” estimated amount, usually based on the local spending patterns of a particular station or maybe patterns specific to a cardholder if the information is available – there are local, national and regional rules at play.

If the value of the final dispensed amount is lower than the amount originally authorised, the merchant submits an authorisation partial reversal within 24 hours for the unspent amount and before clearing the transaction.

However, if the customer’s card holds an available balance below the amount requested by the merchant, the card issuer is highly likely to decline the authorisation request, hence the introduction of the Partial Authorisation.   

The introduction of the Partial Authorisation

A Partial Authorisation is an Issuer-generated response to an authorisation request for an amount greater than that which could be covered by the currently available funds, where the preferred option would be to authorise rather than decline. The Partial Authorisation response allows the issuer to indicate approval of a transaction up to the available balance on the account, as determined by the issuer at the time.

The general principle of the Partial Authorisation response in retail means that transactions are therefore not fully declined – giving the cardholder the opportunity to make up the difference in some other way!

Fuel dispensing is a special case because the total value of the goods (fuel) is not fixed, and so the returned Partial Authorisation value can be applied to the pump and used as a transaction limit for the fuel.

AFD Authorisation Response

Prior to the widespread implementation of the Partial Authorisation Response for an Authorisation Request originating from an AFD (MCC  5542), the issuer was limited to responding to the £1 Status Check with either an approval or a decline … and if the issuer approved the authorisation request, the issuer (in the UK) became financially liable for the maximum possible dispense of £99/£100.

Following the implementation of the Partial Authorisation response, it is now possible for the issuer to respond to an estimated authorisation request, effectively advising the Fuel Dispenser of the cardholder’s available balance, and therefore the maximum permissible fuel transaction value – especially important for issuers and cardholders where the available balance is lower than the prevailing fuel dispensing limit.

Automated Fuel Dispensing in Europe

Across Europe, the Estimated Authorisation with Reversal model has been adopted.

The merchant generates an estimated authorisation amount, up to a maximum value of 150€, which is then submitted to the issuer for approval. If the cardholder’s available balance is greater than the requested authorisation amount, the issuer returns an approval response, and the fuel dispenser is activated.

On completion of the refuelling process, the merchant generates an Authorisation Partial Reversal to update the issuer on the status of the transaction and to allow the issuer to release the unused ring-fenced funds back to the cardholder.

Where the merchant systems are able to support Partial Authorisation responses, which is flagged in the original authorisation request message, the issuer may return a response indicating the current maximum available funds on the cardholder’s account, should the funds available be less than the authorisation request, rather than simply responding with a decline.

The merchant can use the amount returned in the Partial Authorisation response to set the maximum amount of fuel that may be dispensed at the pump. 

If the value of the fuel dispensed is the same as the amount returned in the Partial Authorisation response, no further action is necessary on the part of the merchant; if the amount dispensed is lower than the amount authorised, the merchant generates a Partial Reversal for the difference.

Automated Fuel Dispensing within the UK

Similar changes are being implemented across the UK. Tesco announced that the £1 Status Check is being replaced with a £99 authorisation request, and The Sun has reported that Morrisons are submitting a £100 authorisation request at their fuel stations.

The £99/£100 authorisation request is the UK equivalent of the European 150€ maximum. This looks like it may have been implemented as a fixed amount, but the Visa pay-at-pump information still suggests that the authorisation amount could be lower.

The remainder of the processing follows the European Estimated Authorisation with Reversal model, with a Partial Reversal being generated where the value of the fuel dispensed is lower than the amount authorised by the issuer.

The service is being rolled out across the country, and so may not yet be available at every fuel station. Once completed, these new payment processes will mean that prepaid payment cards can be used to purchase fuel at any of the nation’s Automated Fuel Dispensers, as well as still being available for use to pay the cashier.