Tuesday, February 07, 2006

Citi and MasterCard Run PayPass Trial on NY Subway

As contactless payment solutions become more prevalent, especially for transactions under a dollar, the question is what is the interchange fee?

In this case, what will Citi Group and MasterCard be charging New York's Metropolitan Transportation Authority?

WayTooHigh.com has long held that technology should force transactions to be quicker and less expensive. If that is the case, why are the other nearly one-hundred merchant interchange fees in the United States at levels higher than most other industrialized nations?

While this contactless payment technology is innovative and clearly represents a booming new opportunity, what is missing from all the press hype is what is the cost to the merchant. When contactless payment occurs at McDonald's for a small bag of fries, does that mean the fast food giant turns over much of the sale to the bank for interchange fees? Sure, it's convenient, but for the consumer or for the banks' earnings?

[source: WayTooHigh.com]