Fleet cards play a crucial role in the day-to-day operations of fleet managers by offering a centralized payment system, which allows them to streamline fuel and maintenance expenses, track transactions, and monitor driver spending.
With these capabilities, fleet cards empower managers to effectively manage costs, enhance operational efficiency, and maintain better control over their fleet. While fleet cards have been around a long time, new fintech players are coming on the scene, and electrification is changing the whole ecosystem.
In a recent report, “Fleet Cards in 2023: An Industry in the Fast Lane,” Ben Danner, Senior Analyst of Credit and Commerce at Javelin Strategy & Research, explores the different types of fleet cards, and how the industry is shifting to accommodate electric vehicle charging.
Differences in Fleet Cards
There are three main kinds of fleet card systems—closed-loop, open-loop, and dual network cards.
“Closed-loop fleet cards operate on a proprietary payment network owned by the card issuer, such as WEX Bank, and have partnerships with fuel merchants,” Danner said. “By using closed-loop cards within the network, drivers can benefit from negotiated fuel prices below market value, resulting in fuel rebates and significant discounts.”
That said, they can only be used at specific gas stations, and only for gas.
The card issuer generates revenue through interchange fees and membership fees paid by the fleet company, which can lead to substantial savings for large-scale operations.
“While the exact discount per gallon may vary depending on the card and negotiation terms, it typically ranges from two to five cents, but closed-loop cards may offer even more substantial discounts that are privately negotiated and not publicly available,” Danner said.
Open-loop fleet cards offer wide acceptance at most merchants, and typically run on the Mastercard or Visa network. Open-loop cards can be used for various purchases beyond fuel, including maintenance expenses, but generally they provide fewer discounts compared to closed-loop cards.
“In the fleet fuel space, innovation has primarily been focused on open-loop cards, as closed-loop cards are predominantly owned by established fuel networks,” Danner said. “Fintech companies like Coast and Highnote are offering open-loop card solutions, leveraging partnerships with Visa or Mastercard. Visa, in particular, has been actively seeking open-loop partnerships.”
The dual network card offers a combination of closed-loop and open-loop functionalities. One example of this is the U.S. Bank’s Voyager Mastercard, which launched in 2021. It allows transactions on both the U.S. Bank Voyager closed-loop network and the Mastercard network, and provides the benefits of both types of cards.
“While dual network cards offer the advantages of proprietary and open-loop networks, they typically involve membership costs and trade-offs due to the broader payment acceptance they provide,” Danner said.
Impact of Electrification on Fleet Cards
While diesel fuel still dominates the trucking and transportation industry, the rise of electric vehicles (EVs) is growing in popularity, especially when it comes to last-mile delivery. Companies such as Amazon are investing in electric fleets, utilizing their own private charging infrastructure.
“This shift towards private infrastructure ownership may impact fleet payments, as businesses can directly charge their vehicles without relying on public infrastructure or EV acceptance at gas stations,” Danner said. “However, widespread adoption of electric vehicles for long-haul transportation is still limited by range and cost considerations.”
Fleet payment solutions will need to address new complexities, such as tracking vehicle charging and reimbursement for drivers who charge their EVs at home. Furthermore, their business models may need to adapt as privately-owned charging infrastructure becomes the norm.
Learn more about how fleet card vendors are addressing the needs of fleet customers, as well as how alternative fueling will affect the fleet card market.