SPS Payment Systems Inc., a leading processor of privatelabel credit cards, is moving to increase its transaction traffic through card-processing deals with government agencies.
By offering them the ability to improve cash flow and reduce fraud, SPS has signed several municipalities, counties, and other governmental arms to deals that generate lransactions for the processor.
The transactions stem from consumers' using credit cards to pay highway toils,
parking fees, auto impound charges, and so torth.
Government customers of SPS include the City of Chicago and the Orlando-Orange County (Fla.) Expressway Authority.
The contracts provide a significant source of new transaction volume, which lets the processor get more use out of its expensive computers. An airport parking operation, for instance, can generate up to 750,000 transactions a year.
Increasing the attraction is the fact that the card applications used by governments typically are proprietary and so SPS can charge a premium price for processing.
"While we certainly love to do the plain vanilla-type high- transaction volumes, the fact is the simpler the product is, the more likely it is to sell at a commodity price," said Robert W. Archer, senior vice president of sales at SPS, which is based in Riverwoods, Ill.
"So we like solutions that demand value-added technology."
In an attempt to garner more fees for these value-added services, SPS is soliciting business from a number of city, state, and county revenue departments.
These agencies oversee the collection of a wide range of fees, including parking tickets, utility bills, taxes, licensing charges, and building and electrical permit fees.
SPS officials said they believe the company has just begun to scratch the surface of govenment business.
Mr. Archer admits there are hurdles to acquiring new transactions from government agencies, including laws forbidding many governmental units from paying a discount on credit card transactions.
Nevertheless, he said, some states and cities are doing away with such restxictions, and some agencies are finding ways around the laws.
"We are going to see more and more" government contracts, he said. "Card usage is driven by the consumer who says 'I want to be able to pay with a credit card,' and with all the fees that government units have, credit cards are going to have to emerge as a [payment] option."
