ACH (Automated Clearing House) and or Credit Card recurring billing can be a big-time energy and money saver for any business that handles these type of transactions. Many of these types of customers can qualify for preferential interchange rates in the associations' emerging markets bucket.
Visa CPS/Retail 2 for Select Emerging Markets
- Restricted to the following MCCs: Government (9211, 9222, 9399), School (8211, 8220, 8299), Utilities (4900), Insurance (5960, 6300), Cable and Other Pay TV (4899)
- Must be electronically authorized
- Transaction must be sent for processing within 24 hours of the authorization
- Transactions not meeting CPS requirements will not qualify and will be classified accordingly
- MCC 5960 must meet CPS Card Not Present requirements
- AVS is not required for CPS Retail 2
MasterCard - Incentive Program (SIIP)
- Restricted to keyed transactions to the following MCCs: Telecommunication Equipment(4812), Telecommunication Services (4814), Cable and Other Pay TV (4899), Utilities (4900), Insurance (5960 and 6300)
- Applies to consumer cards only
- Merchant must sign marketing agreement with MasterCard
- Electronic authorization is required and must be settled within 1 day of authorization
- Transaction must include special indicator in authorization and settlement records
Emerging Payment Solutions
Electronic payments are far more convenient method for consumers to pay their bills. Payment card usage for bill payment has increased over 300% during the last two years. In addition, the vast majority of bill payment merchants in industries such as insurance, cable and telecommunications now accept payment cards in the majority of their markets. The benefits are obvious to the consumer as well as the companies providing the bill payment solution to them.
Again telling a profit story means knowing how you can help a merchant, while asking the customer questions about their own business and using those answers to show the merchant savings or earnings that are tough to dispute. So let’s look at a typical small / mid size merchant doing recurring billing. That would be small utilities (phone, cable, internet, trash) or anyone who’s renting anything or who receives steady payments from anyone (apartments, storage, tools, government, schools, etc.)
So let’s say you're talking to a merchant customer who currently bills 500 customers a $50 fee per month. Right now the merchant prints invoices and mails them to their customers and then waits for remittance payment via check. For 20% of the merchant's special customers, he may hand-key credit card transactions for the $50 monthly fees. Its a well documented fact that the cost of preparing and mailing and processing an invoice runs around $5 each.
The total merchant costs in this example just to bill his customers could easily be $2000. The merchant service fee of 2.5% and .25 for the hand keyed transactions runs $150 and, assuming it takes 5 minutes to complete each transaction, (the special customer 20% which would mean 100 transactions requiring 8.3 hours of hand work costing about $250. Now by this common example, it costs this merchant $2250 to bill 500 customers for $25,000 or almost 1% of the total monthly billing.
So by shifting this merchant to an automated ACH program to handle the 400 checks that could easily be processed .50 cents each, thus saving the merchant $1800 per billing period. The merchant would also see enhanced reporting showing rejected checks, etc. and would experience both a better cash flow and lower NSF fees.
After the initial set-up the merchant could eliminate the 8.3 hours of hand keying the credit card transactions of his priority patients and if the merchant have qualifies with the correct MCC, he can also take advantage of preferred interchange rates saving additional money.
So, the profit story to this relatively small merchant is net $1800 in monthly savings. So go ahead and earn a fair profit on the software or terminal and the merchant will still love you!
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