Public sector institutions—including transportation agencies and various levels of government—face major challenges in their efforts to control costs and improve cash flow and payment compliance.

With updated government information technology systems and a growing use of the Internet to make payments, acceptance of payment cards in the public sector is on the rise. Cards are used to pay for everything from taxes and child support to public transit and DMV transactions.

Public sector agencies can benefit in many ways from card acceptance. Displacing check and cash transactions yields immediate cost savings on check deposit or lockbox fees, bounced checks and armored car service. Card acceptance also reduces the cost of labor to process transactions, mail and deposit float, and reconciliation and shrinkage. In the case of discretionary payments or delinquencies, acceptance of MasterCard cards can enhance the likelihood of payment.

Payment card acceptance is playing a growing role in helping agencies to achieve the following important financial and customer service goals.

Labor and Operational Efficiencies

Credit and debit card acceptance allows agencies to automate fee collection via the Internet, automated telephone voice response units, and self-service kiosks. Card transactions are often completed more quickly and efficiently than transactions that involve making change, filling out forms, or processing checks.

Automated transactions can also result in substantial labor savings by reducing customer traffic in field offices with high labor, real estate, and overhead costs. In addition, payments in cash—which normally is counted several times before it reaches your depository bank—or by check may create additional expenses such as armored car services, data entry costs, and bank deposit or lockbox fees.

Improved Cash Flow

The electronic payment methods available with cards today can result in funds deposited in an account more quickly, allowing you to earn interest faster. In addition credit and debit card payments made by telephone or in a face-to-face environment can eliminate "mail float"—the interest forgone while checks are in the mail.

Reduced Risk of Losses from Bad Checks

When card transactions displace check transactions, the resulting volume of checks returned for "non sufficient funds" (NSF) and their associated fees, penalties and collection costs are reduced. This also diminishes redeposit fees that your agency must pay, as well as the cost of processing additional transactions.

Enhanced Payment Compliance

Card acceptance offers payment flexibility—allowing cardholders to spread payments out over time. This can result in healthier collection rates of taxes, fees and fines and increased revenues. Consumers also appreciate the convenience of debit cards that enable them to access a checking account without writing a check.

Increased Customer Satisfaction

Electronic payment methods allow public sector agencies to match the level of customer service typically provided by companies in the private sector. Improvements are evident in shorter waiting times, better customer relations, and greater access to information. The speed, convenience, and payment flexibility that cards offer have become a way of life for consumers, who demand an ever-wider variety of payment choices from government agencies. In fact, the costs involved in card transactions can often be partially or fully offset by the benefits discussed here.