After six years of market development, MasterCard International's consumer bill payment processing service is finally hitting its stride.

Called the Remittance Processing Services, or RPS, the system is used by banks and non-banks to electronically transmit money and payment information from consumers to merchants.

Visa U.S.A. does not offer a comparable service. At first, that didn't seem important, since RPS was slow to catch on.

10 Million Payments

It took three years for a million payments to flow through. But since then growth has escalated. This month, the service handled its 10 millionth payment.

"That alone speaks volumes," said Simon T. Nahnybida, the MasterCard vice president in charge of RPS. I wish my and your salaries accelerated at that rate.

Many bankers consider the service key making electronic bill payment economical.

It is also the core element in MasterCard's new MasterBanking home banking service, which the card association is marketing with Checkfree Corp., of Westerville, Ohio.

In alliance, Checkfree will offer its personal-computer and telephone bill payment service to banks. But Checkfree is also using RPS to electronically transmit many of its payments to merchants.

No. 1 Customer

That makes Checkfree the service's biggest user. But Checkfree isn't alone. About 80 banks and nonbanks route payments through the MasterCard system.

Other large users include Mellon Bank Corp., Bank America Corp., Citicorp, and Chemical Banking Corp.

More than 180 merchants receive payments through RPS, including American Express, Citibank's MasterCard, Visa and Diners Club cards, Brooklyn Union Gas, Macy's and the Los Angeles Times.

The service was started to eliminate some of the processing kinks that threatened to derail electronic bill payment services in the late 1980s.

Not Compatible

At that time, the only economical way for banks to electronically send consumer bill payments to merchants was through the automated clearing house.

But few of the merchants' banks had computer systems capable of receiving consumer bill payments through the clearing house.

Also, clearing house operators were not focusing on the consumer bill payment market.

As a result, most electronic bill payments were converted to checks that banks and bill payment companies mailed to merchants.

This is still the case. But as transaction volume on RPS grows, the use of paper checks could decline.

That's good news for merchants, since checks mailed by the bill payment companies are expensive to sort, as the checks don't include the payment stubs merchants mail to consumers.

The payment stubs have information encoded on them that computers and sorting equipment read, and use to automatically post payments.

This means that checks mailed without stubs must be handled manually.

|An Enormous Save'

The added cost can be tremendous.

For example, Citicorp says it costs 10 cents to 18 to process each payment mailed to the bank's credit card unit with a payment stub.

Payments that come in without stubs cost up to 65 cents to process. But payments delivered through RPS cost only 2 cents to process.

Since Citibank receives about 300,000 payments a month through the service, it provides the bank "an enormous save," said Joseph J. Curcio, the bank's assistant vice president of electronic payment services.

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