In the real world, it’s actually cheaper for businesses to accept ACH transactions than it is to accept paper checks. At the Western Independent Bankers Association 2006 Technology Summit it was estimated that it cost a merchant $.05 to process an ACH transaction versus $.12 to process a paper check transaction. And even if you use a debit or credit card, the cost generally is lower because you get to verify that the funds are generally good immediately, and that keeps you from spending a boatload of time collecting accounts receivables.
And if you accept Visa and MasterCard cards, you may not charge a surcharge for a transaction, because Visa International and MasterCard specifically prohibit that behavior — because they want to get their cards used as widely as possible (See this article from the Seattle Post-Intelligencer for a good discussion on this topic).
But government, specifically the Minnesota Department of Transportation (MnDOT), is fighting electronic payment processing kicking and screaming…
Instead of trying to push consumers in the state to use electronic transactions to renew their vehicle licenses, and reduce the number of personnel they need to hire to process all those checks, they charge a $1.25 processing fee, because governments apparently are exempt from the prohibition from charging fees.
It seems to me that if you want to reduce your costs, you would promote the use of cards and ACH, but MnDOT specifically discourages this by explaining that they’ll process your paper check for free, but if you want to save the state money in transaction processing, it will cost you $1.25 in the following brochure that is sent with your auto tabs renewal bill:
And to add insult to injury, instead of working with their banks to aggregate CheckFree and Quicken transactions and have them processed as ACH transactions, they just return the paper checks that the online payment processors send to them on the instruction of their customers, as evidenced by the notice posted on this cab card:
I wonder what they’ll do when the Federal Reserve starts charging additional fees so that they can get out of the paper handling business…
Don’t think that I’m just bashing MnDOT to add to their already burgeoning list of failures including the I-35W bridge collapse, the failure of the Senate to confirm the Lt. Governor as the director, and their failing to make me a job offer; as I wound up in another agency that seems to take as much pleasure in bending over backwards as MnDOT takes in being obstinate.