he card Associations classify newly created processes of credit card acceptance (for which no industry merchant category currently exists) as emerging markets, and opportunities are growing for you as merchant level salespeople, in these categories of merchants. Transactions that fall under this category receive special interchange pricing consideration, and the Associations restrict pricing to utilities, insurance, cable companies, telecommunications, government and schools.

Each card Association has its own unique emerging markets program, which it restricts to specific Merchant Category Codes (MCC). Visa U.S.A. calls its interchange rate program for select emerging markets the CPS/Retail 2. The interchange rates are 1.43% + $0.05 for credit and 0.80% + $0.25 for debit. MasterCard International calls its program the Service Industries Incentive Program (SIIP). The interchange rates for this program are 1.15% + $0.05 for credit and debit (debit transactions have a break-even amount of $57.14).

In order to help merchants qualify for these reduced rates, work with your processor to submit the appropriate forms to each card Association. Following are some of the specific requirements for Visa and MasterCard programs:

Visa CPS/Retail 2 for Select Emerging Markets

• Restricted to the following MCCs: Government (9211, 9222, 9399); School (8211, 8220, 8299); Utilities (4900); Insurance (5960, 6300); and Cable and Other Pay TV (4899)
• Must be electronically authorized
• Transaction must be sent for processing within 24 hours of the authorization
• Transactions not meeting CPS requirements will not qualify and will be classified accordingly
• MCC 5960 must meet CPS Card Not Present requirements
• AVS is not required for CPS Retail 2 MasterCard's Incentive Program (SIIP)
• Restricted to keyed transactions to the following MCCs: Telecommunications Equipment (4812); Telecommunications Services (4814); Cable and Other Pay TV (4899); Utilities (4900); and Insurance (5960 and 6300)
• Applies to consumer cards only
• Merchant must sign marketing agreement with MasterCard
• Electronic authorization is required and must be settled within one day of authorization
• Transaction must include special indicator in authorization and settlement records

The Utility Opportunity

An emerging market with a lot of potential is the utility segment (MCC 4900 includes Gas, Electric, Water and Waste).

A new Visa utility interchange fee for consumer debit and credit card transactions is now available, effective April 2005. Visa enacted this program in order to generate additional Visa card acceptance and to address utility merchants' concerns about the costs of accepting Visa-branded cards.

The flat transaction rate for utility merchants will require a registration process. One of the necessary reasons for obtaining this rate is the elimination of convenience fees by the utility companies.

Visa and MasterCard prohibit merchants from charging cardholders a surcharge; however, the Associations do make a distinction between a surcharge and a convenience fee.

Essentially, merchants may offer cash discounts provided that they clearly disclose them to consumers and present the cash price as a discount from the standard price charged for all other forms of payment.

By accepting and adhering to Visa's utility program, utility companies stand to benefit by enhancing cash flow as a result of on-time receipt of funds, posting payments more quickly and offering customers more options on how they pay their bills.

Other benefits include reduced expenses resulting from lower billing, collection and check handling costs.

MasterCard also offers special interchange rates for the utility sector within SIIP. Obtain these rates (and all the emerging market rates) from your processor or visit GS Online's MLS Forum at www.greensheet.com .

Emerging Bill Payment Solutions

It's now more convenient than ever for customers to make electronic bill payments. The Associations now accept payment cards in more traditional spending categories, and according to statistics from Visa, payment card usage for bill payment has increased more than 300% during the past two years.

Additional research shows that 27 of the largest 30 bill-payment merchants in insurance, cable and telecommunications now accept payment cards in the majority of their markets. The benefits are obvious to the customer as well as the companies providing the bill payment solutions.

There are two ways to provide electronic bill payment: manually and automatically. With the manual solution, cardholders enter card information for each individual payment; they control what they pay and how and when they make their payments.

Depending on the processor, merchants can choose from several Class-A certified terminals to use for manual payment processing, which VeriFone Inc., Hypercom Corp. and Lipman USA manufacture.

Automatic bill payment enables merchants to set up scheduled payments and eliminates the need to re-enter customers' credit card information each time payment is required.

Recurring billing solutions provide a streamlined process for customers to pay their regularly scheduled bills.

The merchant will realize many benefits from offering an automated bill payment solution including better cash flow, reduced mailing and collection expenses, increased revenue and, most importantly, improved customer loyalty and satisfaction.

Several solutions for recurring billing are on the market. They include GO Software Inc.'s (now owned by VeriFone) PC Charge Pro software gateway, Internet-based virtual terminals such as what Authorize.Net, Ezic and VeriSign offer, and alternative gateways like ACH Direct's virtual terminal, which supports the processing of credit and debit cards and electronic check (automated clearing house/ATM) transactions.

In addition to the advanced gateway options, emerging markets customers will also qualify for the special interchange rates where the cost of accepting hand-keyed recurring credit cards will be as low as if they were card present transactions.

Pricing to Win the Sale

Currently, the majority of emerging markets merchants are priced as retail accounts and are being charged mid or non-qualified keyed-in discount rates. This is where sales opportunities come to light.

Because of the emerging markets programs now available, the average cost incentive for customers that fall into this category is more than 50 basis points below that of keyed-entered retail.

The result is a large opportunity for savings and greater profit margins for these merchant types. The critical factor for the approved qualification and pricing is that processors ensure that merchants have submitted the proper paperwork and are set up and priced correctly according to the specific interchange program.

When completed properly, the keyed-in qualified sales for the emerging markets categories will receive the qualified rate. This enables you to price sales in this category as low as the swiped rate for retail or to creatively build some additional profit into the opportunity.

Peter Scharnell is Vice President of Marketing for Electronic Exchange Systems (EXS), a national provider of merchant processing solutions. Founded in 1991, EXS offers ISO partner programs, innovative pricing, a complete product line, monthly phone/Web training, integration services and, most of all, credibility. For more information, visit EXS' Web site at www.exsprocessing.com or e-mail Scharnell at peter.scharnell@exsprocessing.com . Electronic Exchange Systems is a registered ISO/MSP for HSBC Bank USA, National Association.