Visa Cuts Debit Small-Ticket Rate

  Visa USA, it appears, now sees big business opportunities from small payments. The card association in November unveiled a strategy to push cash out of small-ticket purchases by making it less expensive for merchants to accept Visa check cards beginning in April.
  As has been the case with other Visa initiatives, the goal is to reduce consumer use of cash and checks at the point of sale.
  "Our initiative will grow a preference for Visa payments over paper by making checkout faster, offering consumers an undisputed convenience and delivering bottom-line value to merchants," Elizabeth Buse, Visa executive vice president of Product Development and Management, predicted in a statement.
  Visa says that is April it will increase merchant incentives to accept Visa check cards by lowering debit interchange rates for small-ticket purchases. Visa has introduced a check card interchange rate of 1.55% of the sale plus 4 cents. When a merchant joins the Small Ticket Payment Service, however, it receives a 20% discount on consumer check card transactions of $15 or less. The credit card interchange rate, which is unchanged, is 1.65% plus 4 cents.
  Affected merchants include many that have sued Visa and MasterCard International over alleged price fixing and collusion in the setting of interchange rates ("Judicial Panel Combines Interchange Suits," November).
  In its November announcement, Visa said it will expanded its small-ticket program, which launched in October 2003, from seven to 14 merchant categories because of dramatic annual growth in Visa activity among the initial qualifying merchants, a Visa spokesperson says. New merchant segments include bus lines, tolls, bridges, newsstands, laundries, dry cleaners, copy services and car washes. The initial merchant categories that qualified for the program included quick-service restaurants, regular restaurants, parking lots and garages, movie theaters, video stores, local public transportation, taxicabs, and limousines.
  In addition, Visa will eliminate the signature requirement for authorized transactions of less than $25 to speed checkout in 17 merchant segments where fraud has been historically low, including drugstores, taxis, tolls, bridges, dry cleaners, movie theaters and parking lots.
  In a statement, Visa says small-ticket payments are "ripe with opportunity." In other words, they equate to big bucks.
  "The merchant segments that qualify for Visa's small-ticket program represent approximately $750 billion in annual consumer spending, half of which is made with cash," the association says. Visa says its volume for purchases less than $25 in the affected segments was $39.2 billion last year.
  MasterCard, which sponsors the nation's other signature-debit product, debit MasterCard, would not discuss specifics about its interchange rates or say whether it plans to provide similar pricing incentives for small-ticket transactions. MasterCard similarly does not require cardholder signatures for transactions less than $25 conducted at select merchant types.
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