After experiencing success with a similar initiative supported by MasterCard Worldwide, Online Resources Corp.’s efforts to encourage payment card acceptance by utilities is beginning to receive the backing of other card brands.
Earlier this week, the company announced that Visa Inc. also has signed on (see story). The program enables utility companies to pay lower merchant discount rates as long as they do not impose a convenience fee.
Participation is available through Online Resources’ eCom Advantage program, which offers a suite of electronic-billing services that includes payments, presentment and receivables. Water, sewer, electric, gas and other utility companies, either public or private, may participate in the lower-cost program.
For the past four years, Online Resources has participated in the MasterCard Utility Industry Program by offering utility companies a lower-rate if customers pay using MasterCards. Because not all consumers use MasterCards, Online Resources decided to participate in Visa’s utility program as well, Bill Kinnelly, the Chantilly, Va.-based company’s senior vice president of product and marketing of e-commerce services, tells PaymentsSource.
Now Online Resources’ participating utilities may reach out to Visa cardholders–“serving about 60% of their customer base, as about 60% of consumers have a Visa card,” Kinnelly says.
Visa has been working to expand card acceptance at utility companies for many years,” a Visa spokesperson tells PaymentsSource, noting more than 1,000 U.S.-based utilities accept Visa for bill payment. Regardless of the bill amount, the Visa Utility Program includes lower-cost interchange rates for qualified consumer and business debit and credit transactions, she says.
Through Online Resources, utilities can reduce what they pay for a card payment from about 2% of the bill amount to instead 75 cents for consumer payments and $1.50 for business payments, Kinnelly says. So, on average, for a $200 bill the utility company can save about 80% on processing fees, Kinnelly explains, citing data Visa provided and the company’s own transaction data.
Utilities also are able to choose which payment channels to apply the discounts, especially if they prefer to collect payments through one outlet over another, Kinnelly says. A utility may charge a service fee for typical walk-in or over-the-phone payments but will waive the fee when customers pay with a Visa card, he adds.
Efforts to reduce how much utilities pay to accept credit card payments have existed for several years. They are designed not only to help consumers and utility companies save money, but also to help encourage use of networks’ branded cards, Adil Moussa, an analyst for Boston-based Aite Group LLC, tells PaymentsSource.
“If consumers use a specific card on a monthly basis, research shows consumers are more likely to keep using that card for other purchases and will not end up switching to another brand,” he says.
Moreover, utility companies also benefit because of the guaranteed monthly payment, Moussa notes.
Indeed, not only are lower-cost payment programs a money-saving benefit for utilities and consumers, but they help “build loyalty for the networks and issuers behind the specific card, as the goal is to push consumers into the habit of using their credit or debit cards as a reoccurring payment,” he contends.