Perspective

Fortnightly Magazine - November 1 1997
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We won't move to credit cards until our customers demand the option.

EVERY DAY, CUSTOMERS OF PUBLIC utilities ask the same question: "If I can buy my gasoline, grocery, medicines and all other necessities with plastic, then why can't I pay for my electricity, water, gas and telephone bills that way?"

Public utilities (em except long-distance telephone companies (em have yet to enter full-blown competition. When they do, utilities should decide whether to pursue the credit card option.

A utility will base such a decision on cost of accepting credit cards versus retention in the customer base. About

2 percent of each credit card transaction would be lost to processing fees. For example, if a utility with revenues of

$1 billion accepts credit cards, it will incur fees of $2 million if it receives only 10 percent of customer revenues through these transactions. One solution is to charge the customer this fee, but right now most utilities can't take advantage of this option.

But there are other issues too. For instance, nobody expects utility sales to increase from credit card use, as in other industries. The typical utility customer only uses the electricity, gas and water she needs when she needs it. And, of course, there is always fraud.

Ultimately, customer demand will decide whether utilities accept credit cards.

What Bankers, Consumers See

According to industry sources, billions of credit cards circulate the world. Credit card transactions are growing at a pace of 20 percent per year. Consumers are charging billions of transactions for more reasons than credit.

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