Visa Cuts Interchange for Utilities That Forgo Surcharges

Hoping to increase its penetration in consumer bill payments to gas, electricity, and other utility companies, Visa USA today rolled out incentives for utilities to accept its cards and to encourage more card transactions. The incentives include a lower credit and check card interchange fee on certain consumer card transactions when utilities forgo so-called convenience fees. The new interchange fee, which is a flat 75 cents, will go into effect April 2, replacing the current rates of 1.43% plus a nickel on credit cards and 0.8% plus a quarter on signature debit. To earn it, utilities must agree not to charge consumers surcharges?often called convenience fees?for using cards to pay their bills. These surcharges typically run from $3 to $6. The new interchange fee will result in lower interchange costs for acquirers on bill payments of $49 and higher for credit cards and on payments exceeding $62.50 on check cards, which are Visa's signature-debit products. Other incentives include: technology assistance to help with card acceptance and marketing materials to promote cards to consumers for bill payment. A Visa spokeswoman says the card network can't say how many utility companies charge convenience fees, but adds that it's “fairly common” in the industry. Under Visa's operating rules, such surcharges must be flat fees and are allowed only in card-not-present transactions, and only when transactions come from a payment channel outside of the merchant's customary channel (for example, the Internet). Also, the merchant must: clearly disclose the fee as a cost for using the merchant's alternative payment channel; charge the fee on all transactions it accepts in that channel, including payments settled over the automated clearing house; and not charge the fee on recurring payments. Visa is also touting other benefits of accepting cards, including research it says shows that card payments post 72% faster than checks and that delinquency rates are 20% lower than on checks. It says utilities account for $177 billion in annual sales, of which Visa currently captures 2% on its credit and debit cards, or about $3.5 billion, up 42% in the past four quarters. The segment as a whole, it says, is growing at a rate of 4% a year.