Visa U.S.A. has extended to several classes of merchants a discount pricing system designed to encourage automated handling of card transactions.

The new schedule of interchange fees, which are a key determinant of the card-accepting costs borne by merchants, was approved at Visa's recent annual meeting in Cannes, France.

Interchange fees, technically reimbursements for processing expenses, are paid on each transaction by the merchant's bank to the cardholder's bank.

As part of a payment-system improvement and risk-reduction effort known as PS 2000, Visa had previously lowered the per-transaction rates for merchandise retailers that met the program's standards.

Starting April 1, retailers with upgraded systems could qualify to pay 1.25% of a transaction. That translates into 87.5 cents on a typical $70 sale, or $1.25 per $100.

By contrast, the standard interchange rate on traditional paper-based transactions - a dying breed in the U.S. - is 2% of the sale plus 1I cents. On a $70 transaction, that would be $1.51, and on $100, it would be $2.11.

Higher-Risk Categories

The new schedule announced last week extends discounts - somewhat less generous than those offered retailers - to categories of merchants whose transactions are thought to pose greater risks to the card system.

Passenger carriers such as airlines can qualify for a rate of 1.35% plus 5 cents if a card is presented in person, or 1.60% plus 5 cents if no card is seen.

For hotels and car rental firms, the rate can be 1.35% plus 5 cents. Direct marketing firms that comply with the processing requirements can qualify for a rate of 1.55%, plus five cents.

The Lock-In Factor

Though the rates are no different from the best ones currently available to some of those merchant categories, B. Ray Traweek, Visa executive vice president of operations, predicted merchants will welcome the new pricing schedule because it enables those who qualify to lock in the best rates through March 1997.

Greater automation "should significantly reduce requests for copies and chargebacks that [these] merchants have to deal with," he added.

Visa and MasterCard International continually reexamine their interchange rates and often reset them annually. Visa is leaving the standard interchange rate at 2% plus 11 cents for 1994-95.

Visa also said a special rate that has been offered to encourage supermarkets to accept cards would be increased to 1.1%, from 1%, next April 1.

MasterCard International's fee structure, to be reviewed by the board next month, provides for a charge of 2.18% plus 10 cents for a standard paper transaction. Travel and entertainment merchants, including airlines, hotels, and car rental agencies can get a fee as low as 1.3%. The best rate if no card is seen is 1.6% plus 9 cents.

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