Easing “payment anxiety” around EV charging

In this article, Keith Brown – Managing Director at Paythru – explores the issues that currently surround pre-authorisation – particularly around refunds and the need for standardisation between operators to avoid nasty surprises for drivers. 

On top of ongoing uncertainty regarding battery range and the availability of chargepoints, drivers of electric vehicles (EVs) now have something else to worry about. The latest in a catalogue of concerns, ‘payment anxiety’ arises from not knowing how much a driver will pay each time they charge their vehicle, whether there will be hidden charges and whether the payment will even work. One of many issues causing payment anxiety is that of pre-authorisation – and the lack of consistency among chargepoint operators with regards to it.

In pre-authorisation, an amount of money is reserved against a driver’s credit or debit card. Not only does this prove that the card is valid, but it also ensures sufficient funds are available to pay the total cost of the charge. But the amount reserved on drivers’ accounts differs between operators, and the length of time it takes to return reserve funds can vary depending on the card issuer. As a result, EV drivers can often find themselves faced with unexpected debits when they check their bank balance, and can be surprised to receive payment alerts from their mobile banking app. In some instances, pre-authorisation can be mistaken for payment, with drivers believing they may have been charged twice. 

A standardised process will help minimise surprises like this. Incremental authorisation, for example, where the pre-authorised value increases progressively, in line with power consumption, is one example of how chargepoint operators can help alleviate payment anxiety. 

Inconsistencies in pre-authorisation

Many people will have already experienced pre-authorisation when booking a hotel or using a self-service fuel pump. In most use cases, the amount held will be at the merchant’s discretion and can often be high enough to cover the highest possible cost the customer might pay, thereby minimising the risk to the merchant of non-payment following the delivery of a product or service. 

Chargepoint operators tend to take a different approach, using risk as a basis on which to determine the amount held. This takes into account a range of factors such as empirical evidence of previous charges, the charger’s location, and its type, i.e. whether it’s AC or DC. Indeed, average transaction values between 7kW AC street-chargers and high-powered destination-based DC chargers vary significantly; pre-authorising a standard amount wouldn’t be appropriate. 

Therefore, while some chargepoint operators will pre-authorise as little as £1 per charge, others will hold up to as much as £75. EV drivers, though, are unlikely to know just how much an operator will hold until they receive a payment alert, or it appears as a “pending transaction” on their bank statement. 

Additional concerns

The issues with pre-authorisation go beyond inconsistencies around the amount charged, however. Some operators, for example, will pre-authorise on every attempt to charge an EV; they won’t use the outcome of a previous pre-authorisation, despite the fact that it may still be valid. This means that if a charger fails to start on request, a second pre-authorisation amount would be held should the customer try again.

And drivers’ payment anxiety can be further exacerbated by the speed at which pre-authorisation amounts are returned to them – many days in some cases. The issue is that this is a back-office operation which relies on both the operator’s payment provider and the customer’s card issuer. Operators must ensure, then, that their payment provider is able to release a cardholder’s funds immediately. 

Fortunately, there is light at the end of the tunnel. 2019 saw the creation by Visa of MCC 5552, a new merchant category code for EV charging, which requires payment providers to instruct the immediate release of pre-authorisation amounts to a customer’s account. What’s more, MCC 5552 introduces incremental authorisation, a pragmatic solution to pre-authorisation that should help overcome the lack of consistency in the amounts held and the timing of refunds. 

Incremental authorisation

Incremental authorisation dynamically secures funds throughout a charging session, beginning with a low initial pre-authorisation amount which progressively increases in line with power consumption to prevent large reservations being held against a driver’s account once the session has ended.  

By way of illustration, with average transaction values of between £16 and £19, the initial pre-authorisation amount may be set as low as £1, to check the driver’s card’s validity and ensure the charging process can begin, which will then increase to £15 and again to £30, to limit the risk faced by the chargepoint operator. Should a driver make a short stop, where the final cost of charging was around £15, there would be no risk of the driver seeing a pre-authorisation reserve of £75 on their bank statement. 

There are benefits for chargepoint operators, too. As drivers become more accustomed to lower – and then incremental – authorisation amounts, their loyalty will lean more towards those operators they know they can rely on not to put large, unpredictable charges on their card. 

Recent developments

Inconsistencies and a shortage of standards around pre-authorisation are leading to payment anxiety among EV drivers, concerned about the amount of money being held and the length of time it’s held for. 

But with recent developments including the introduction of MCC 5552, changes in banking technology that allow the immediate release of cardholders’ funds, and the adoption by payment providers of incremental authorisation, that anxiety may soon be alleviated for a more frictionless EV charging payment experience.

Image of Keith Brown courtesy of Paythru.