Detroit Takes Deep Plunge Into Card Acceptance for Parking

In a development that represents one of the largest projects so far to replace cash for payment at on-street parking meters, the city of Detroit on Tuesday started accepting credit and debit cards at 175 new multispace meters. The city expects the meters, each of which controls up to 10 spaces, to generate 300,000 card transactions this year from almost 1,225 slots. Card transactions are processed by Peppercoin Inc., a Waltham, Mass.-based processor specializing in so-called micropayments, or transactions of $5 or less. Peppercoin is working with Duncan Solutions Inc., Milwaukee, Wis., which manufactures the meters being used in Detroit, to introduce card payments for street parking. Peppercoin, whose gateway aggregates card payments to reduce the overall cost of interchange, is also handling card transactions for Duncan meters in Las Vegas, Nev., and Oklahoma City, Okla. In addition, Peppercoin says Tybee Island, Ga., will install 37 multispace card-accepting meters early this year, while the processor and Duncan are engaged in pilots in other cities. Separately, the city of Boston in October launched card payment at 23 multispace meters, but shut down the service a month later when it discovered a $2 minimum charge it had mandated violated card-network rules. In December, the city restored card acceptance without the minimum transaction amount. According to processors, cities are attracted to card payments for parking because with cards motorists are more likely to use, and pay for, the maximum time allowed. Municipalities can also raise parking rates more aggressively as they convert more motorists to card-based payment. For acquirers and merchant processors, the market has become one of a number of small-value payment sectors where they hope to convert cash transactions to electronic processing. A consumer survey sponsored by Peppercoin late last year showed 9% of respondents had used a credit or debit card to pay for parking at a meter or in a garage or lot. Twenty-eight percent said they were willing to use a card for this use. Across the U.S., parking generates $10 billion in sub-$5 transactions annually. Peppercoin's gateway works with a number of merchant processors, including Chase Paymentech Solutions Inc., Heartland Payment Systems Inc., Moneris Solutions, and SunTrust Merchant Services LLC. The processor charges merchants a fee of 5 cents, which applies to each transaction submitted for aggregation. This is on top of the acquirer's discount fee, which applies to the aggregated transaction. In this way, a series of five $2 transactions carrying a discount fee of 2% plus 20 cents would cost a merchant $1.20 if processed individually, but would cost 65 cents through Peppercoin's system.