Visa U.S.A. says its three-year-old effort to stimulate card acceptance in new markets has helped shift $40 billion in payments away from cash and checks.

Issuing the first official report card on its new and emerging markets group, the association said the business-to-business market is the most brisk, fueled by the federal government's interest in promoting electronic payments with purchasing cards.

Federal officials "told us who their key vendors are and said they would like to use their Visa procurement card for micropurchases," which the government defines as transactions under $25,000, said Armen Khachadourian, senior vice president of new and emerging markets at Visa. "A lot of state and local agencies-and corporations-are starting to follow suit."

As a result, he said, suppliers like Xerox, Cisco Systems, and Boise Cascade Office Products are signing up for more efficient and methodical card-based systems, which let buyers place orders on-line and receive detailed transaction data.

Previously, these major vendors accepted cards "in a very passive way," Mr. Khachadourian said. "There was no electronic mechanism to get it done, and most of it was done through a telephone or fax."

At least one federal agency, the National Institutes of Health, is conducting all purchasing on-line, using prices that have been negotiated in advance with its top 100 vendors.

Visa purchasing transactions by corporations, manufacturers, and government agencies grew 100% in 1998, to $5.8 billion.

Business-to-business is "going to be about a $10 billion industry for us in 1999, and (the market) didn't exist three years ago," Mr. Khachadourian said.

MasterCard has reported similar experiences. Its purchasing card, introduced in 1993, has been greatly boosted by the General Services Administration's SmartPay card program. MasterCard anticipates that government card spending alone will increase its overall commercial card volume by 16% in 1999.

In general, commercial cards are growing at "two and a half times the rate of consumer cards," said Steve Abrams, MasterCard's senior vice president of corporate products.

Mr. Abrams said small and midsize companies are a "wide open" opportunity for corporate cards, and banks will become more interested in serving them if credit bureaus enhance the data they maintain on these firms.

Outside the business-to-business category, Mr. Khachadourian said, Visa has seen a 75% increase in volume in quick-service restaurants, which generated $312 million of sales in 1998.

Chains such as Pizza Hut, Domino's, and Little Caesar's have led the way, and now KFC and Subway are following suit, among others. "Once you get KFC to do it, their competitors are going to do it," Mr. Khachadourian said.

These transactions tend to be small, but average tickets go up 65% at fast-food outlets when consumers use cards rather than cash, according to Visa.

In another of Visa's emerging categories, recurring payments, 1998 volume rose 37%, to $11.9 billion. Mr. Khachadourian said insurance giants like Allstate and CNA are beginning to accept cards, as have cable television companies, health clubs, and on-line services.

The Federal Emergency Management Agency is accepting card payments for flood insurance, and Visa is encouraging this activity by making corresponding contributions to the agency's disaster relief fund.

California's state university system and Georgia's state-funded colleges are among the growing ranks of schools accepting cards for tuition, according to Visa. Massachusetts residents can pay parking tickets by credit card through a voice response unit, and other states are using similar systems.

Health care, another of Visa's emerging markets, has been growing at "an anemic 16% to 18%," Mr. Khachadourian said, because of the complexities involved in insurance reimbursements.

To coax things along, Visa has modified its rules so that a person can "give their Visa card when they first register for (health care) service, and the payment could take place after the adjudication and claim process with the insurance company," he said.

Warehouse retailers such as BJs Wholesale Club have begun taking credit cards in their stores, but Visa expects more growth in that sector from on- line payments. Costco, for example, has set up an electronic storefront that names Visa as the preferred payment card.

Supermarkets, the first industry Visa approached for emerging-markets treatment, have graduated into the established markets division.

"Traditionally, we as an association helped our members increase their profitability by giving them new types of cards to give to their cardholders," Mr. Khachadourian said. Once that strategy reached "a maturity point," the new group was formed to "find new places where cards could be used."

Next on the horizon, Mr. Khachadourian said, may be taxicabs, an industry that has come to Visa to ask about card acceptance options. "As industries like that come up, we go and talk to them," he said.

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