Gratis launches alternative to high interchange cards

Gratis Card is launching a new debit/credit card that competes directly with Visa, MasterCard, American Express and all of the others. Their pitch to merchants: lower fees. While fees range for different merchants, Gratis is looking to cut fees by 40% to 70%. The card is processed via the internet (versus the private card associations network).

For consumers, Gratis Card is positioning the card for 1) people who do not have adequate credit scores to get a regular credit card 2) people who desire to remain anonymous in their transactions and 3) those seeking a secure alternative to the risks of fraud that accompany a regular credit card.

Fueling this is the ever increasing frustration by businesses who pay the expensive credit card rates. For years now the Card Associations (Visa and MasterCard) have nearly unilaterally decided the prices and rates they would charge merchants. As these rates have gone up over the years, so has the ire of every merchant who has to pay those fees.

Having said that, it’s an interesting situation because most merchants don’t quite know where to point the finger and direct their outrage. Companies like mine who provide the service on behalf of Visa and MasterCard usually get a lot of flak because we’re there and easy to accuse. We however are making very small margins and those margins keep getting smaller. I think it would be fair to say that 85 to 90% of all fees paid by businesses are going to Card Associations, making it clear where the attention should be.

GratisCard, backed by Steve Case, is one company trying to capitalize on the frustration of businesses and is in the process of launching a debit card of their own that would be transmitted via the internet versus the private card networks. To roll this thing out nationally would require a significant amount of momentum from consumers and retailers but it’s the latest attempt to try and introduce some pricing competition into the market.