As more Americans use credit cards and debit cards to eliminate paper bills from their households, merchant banks and payment platforms hope new initiatives can convince more utility companies to accept plastic. According to a report in Digital Transactions News, MasterCard has started a pilot program that significantly cuts the interchange fees on utility payments made with qualifying small business credit card accounts.
Under the new system, MasterCard charges a flat interchange fee of $1.50 per transaction. Typically, merchants pay up to 3 percent of a transaction's total in exchange for the ease and security of electronic payments. Many utility company leaders have stalled plans to accept credit cards for payment, fearing the effects of high transaction fees on margins that are often dictated by state and local governments.
Although acquiring banks may still charge market rates to merchants on each transaction, MasterCard officials note that merchant account providers who pass along the flat rate can earn more business from reluctant small and medium-sized utilities. By using higher-ticket small business electric, gas, and water payments to open the door for consumer credit card acceptance, payment platforms like MasterCard expect more consumers to standardize all of their bill payments on their systems.
About the Author
Joe Taylor Jr. is an internal business consultant for a Fortune 500 company, who writes about finance, culture, and design. He holds a Bachelor of Science in Communications from Ithaca College.