$12 Million In Duplicate Charges From Shell Oil Telco CrashWritten by Evan Schuman
On Saturday (Jan. 29), a telco outage at Shell Oil stations directly caused more than $12 million in duplicate charges for its retail customers. This is yet the latest case of a chain getting burned because the payment industry has no consistent way to deal with in-progress credit and debit charges when systems crash. Does store-and-forward need to be tweaked to be made more crash-proof?
First Data circulated a confidential memo on Monday (Jan. 31) that said it was reversing some 401,120 transactions—totaling $12,135,608.19—of Shell’s retail transactions from the weekend. First Data asked issuers to “post the reversals to the cardholder accounts impacted as soon as possible in order to limit negative impact.” (Guess “negative impact” means customers screaming at call center reps.)
(Important Story Update: AT&T is now denying that any outage took place on their network and Shell is quickly backtracking. See the latest here.)
The incident happened on Saturday (Jan. 29) when Shell “experienced a system issue that impacted credit and debit card processing,” said Shell spokesperson Theodore Rolfvondenbaumen. The credits were mostly made Tuesday (Feb. 1), he said.
Although the details are still being investigated, Rolfvondenbaumen said it was an AT&T “unplanned telecommunications outage” (he conceded that he’s never seen a planned telco outage) and that AT&T handles Shell’s payment card processing network connections.
“Our IT department is investigating the root cause,” he said. “This is the first time it’s ever happened in the Shell network.”
Among those more than 401,000 transactions were “debit card customers who did experience overdraft fees” along with many credit card customers. Shell is “willing to work directly with debit card customers” to cover the costs of overdraft and related fees. “If they were impacted, if someone has been impacted, we will work to make this right for them,” Rolfvondenbaumen said.
This is yet another reminder of the high-cost of retailers accepting debit cards. The interchange fees are lower, but the cards are also much more susceptible to glitching. And when problems happen, the costs are so much higher than for credit cards, as Shell has discovered. Retailers are perhaps too quick to dismiss the retail benefits of zero-liability programs.
The bigger issue, though, is how a telco outage could have caused so many duplicate charges.