Upstart Credit Card Firm Takes on Visa, MasterCard and the Big Banks

There’s a new payment system in town, developed by America Online co-founder Steve Case, called GratisCard.  GratisCard uses the Internet’s series of tubes to lower transaction fees paid by retailers.

That it also increases credit access to lower income consumers and consumers with less than great credit is a side benefit.

Gratis is shoving its way into the arena formerly dominated by Visa and MasterCard.  Merchants have long complained about the fees charged them to be able to accept and process credit cards.  Visa and MasterCard charge, on average, about 2.2 percent per transaction for credit card purchases and 1.75 percent per debit card transaction.

Gratis’s business plan involves sliding in at about 0.5 percent per transaction – a move that could position them to dominate over Visa and MasterCard.  Retailers have long disliked what they felt to be price gouging by the Big Two; it’s likely they’ll listen with an eager and willing ear to a company that plans to offer significantly cheaper interchange fees.