Managing the rising costs of payment acceptance with service fees

As consumers seek convenience and prefer digital payment options, government agencies and public universities are increasingly accepting credit and debit card payments, whether in person, online, or via card-not-present channels such as text-to-pay.

While this boosts the customer experience, financial controllers at these institutions notice that the overall cost of payment acceptance is rising, which increases operating expenses and reduces margins. Consequently, less funding is available for key projects and upgrades because government agencies and public universities operate on fixed budgets.

Fortunately, there is a compliant and effective way to mitigate rising payment costs: service fees. Service fees help public educational institutions and government agencies offset acceptance costs when customers pay by debit or credit card, whether in person or online.

Why service fees work

Service fees prevent financial controllers from cutting corners or reducing services as payment acceptance costs increase. Implementing service fees can provide eligible entities with significant cost savings to help address budget shortfalls or fund services and programs for citizens and students.

Service fees allow government agencies and public universities to add a flat or percentage-based fee to in-person, online, text, and phone transactions when a customer pays with a credit or debit card. The card brands authorized the use of service fees for eligible government and education segments in 2012.

Implementing a compliant service fee program

There are specific card brand rules that govern the collection of service fees. The service fee must be clearly shown to the payee before payment and included on any receipts. It can only be charged on the final transaction amount after any discounts or rebates are applied. Service fees are billed as a separate transaction from the original charge.

Partnering with an experienced payment provider makes implementing service fees easier. A successful revenue-neutral program can redirect funds toward vital programs and services without creating new taxes or fees.

Case study: How service fees helped a DMV save money and improve the payment experience

One of the most active DMV agencies in the country — employing over 8,000 people and serving millions of residents — was mandated to begin accepting credit cards at all its field offices within a year, without increasing its current operating budget.

The DMV decided to implement a managed service fee program tailored to its specific needs, requiring seamless integration with multiple technology partners the agency works with.

The service fee program was a great success, immediately modernizing the department and its field offices. The DMV now accepts payments online or at any location via credit cards, debit cards, and digital wallets. Residents pay when, how, and where they want, while enjoying shorter lines, which has led to higher customer satisfaction levels. At the same time, DMV employees benefit from the operational efficiencies of streamlined processes, less paperwork, and easier reconciliation.

Thanks to service fees, the DMV is functioning more efficiently without exceeding its budget.

Reach out to us to learn more about how service fees and other solutions can help manage costs while offering consumers the ability to pay how they prefer.