MasterCard Cuts Interchange for Rent, Utilities, and Insurance

Apartments and other rental real estate such as vacation properties, one of the great remaining virgin markets for electronic payments, could get a boost in April when a new MasterCard Inc. interchange incentive takes effect that will lower card-acceptance costs for property managers. MasterCard's program is intended to direct more bill payments in the real estate, insurance, and utility sectors away from cash and checks and toward cards. According to a Feb. 8 MasterCard bulletin for merchant acquirers, a copy of which was obtained by Digital Transactions News, the rates that will take effect April 4 include new categories for real estate, utilities, and insurance. The real-estate rate across the consumer and World credit cards and consumer debit cards will be uniform at 1.1%, with no flat fee. All are linked to the Merit 1 category of interchange rates for card-not-present transactions. The savings could be considerable for property managers. For example, if a renter provides his card number on a non-rewards MasterCard credit card with his mailed payment stub to pay his $500 monthly bill, the charge would be assessed at the current Merit 1 rate of 1.89% plus 10 cents, or $9.55. Come April 4, the cost would be $5.50, a cut of 42%. If the renter charged the bill to his MasterCard debit card, the cost would be 1.64% plus 16 cents under the regular Merit 1 rate, or $8.36. With the new rate, the cost would be cut 34%. The only variation on the new 1.1% basic rate is with the high-end World Elite credit card, for which the rate will be 2.20% plus 10 cents. MasterCard's incentive rate for insurance will be 1.43% plus 5 cents on Merit 1 credit card transactions, with the exception of World Elite at 2.20% plus 10 cents. There is no special insurance rate for debit cards. The bulletin says the utilities rate will be cut to 65 cents from a straight 75 cents currently for all consumer credit cards except World Elite, for which the rate will remain at 75 cents. For consumer debit cards, the utility rate will be cut 40%?from 75 cents to 45 cents. All other consumer credit, World, World Elite, and consumer debit rates, including PIN debit, won't change in April, according to the bulletin. “Consumer bill payments in the U.S. region, including both one-time and recurring transactions, represent a significant, and largely untapped, opportunity with an estimated $1.8 trillion in direct consumer expenditures and a relatively low card penetration, estimated to be less than 3%,” the bulletin says. “Adding to the opportunity is the understanding that because bill payments are generally not discretionary expenditures, they provide a potentially stable and sustainable revenue stream that is relatively unaffected by economic conditions.” One company poised to capitalize on MasterCard's real-estate incentive is San Francisco-based independent sales organization and gateway YapStone Inc., which does business as RentPayment. YapStone chief executive Matt Golis likens the program to the interchange incentives Visa and MasterCard began offering to grocery stores in the 1990s, a move that persuaded many supermarket chains to begin accepting cards. “It's a major, major breakthrough,” says Golis, whose firm provides card and electronic-check services to more than 1,000 property-management companies. “The cost of processing is going to be less than before the rate.” Besides the upfront savings, the MasterCard program might be helpful in getting those property managers that do accept electronic payments to abandon their convenience fees, Golis says. Such fees are common in the rental-property industry, but they are problematic because of network surcharging rules intended to reduce merchant discrimination against cardholders compared with customers using cash or checks. The rules vary by network. Merchants more often surcharge on card-not-present transactions, where other payment methods may be impractical, than on card-present sales. Besides trumpeting MasterCard's new rental-property interchange, YapStone is rolling out a new Universal Serial Bus (USB) card reader that attaches to the PC in a rental-property's leasing office, turning the computer into a virtual terminal and enabling the manager to accept card-present transactions without installing extra software. The device also enables the manager to accept move-in deposits and other checks, which can then be processed through the automated clearing house or as Check 21 transactions, according to Golis. Transactions also can be integrated with YapStone's Internet-based, specialized software for property managers that links payment information with financial-management software programs used in the rental-property industry, he says. YapStone also is rolling out a service based on CardinalCommerce Corp.'s CardinalMax platform in which renters can initiate rent payments via text message. The system, in which users pre-register a credit card, debit card or checking account, sends users a text message reminder about an upcoming rent bill to their cell phones. In a test at Ohio's Bowling Green State University, students receiving the text messages could reply that they wanted to pay, which would trigger a charge against the card account or a debit to the demand-deposit account. MasterCard's full listing of interchange rates effective in April can be found at www.mastercard.com/us/merchant/how_works/interchange_rates.html.