For most merchants, getting customers to enroll in an autopay program is a highly desired outcome. But T-Mobile’s recent move to close a credit card payment loophole for its autopay customers signals there may be an even bigger ambition at play: avoiding interchange fees.
T-Mobile has long offered a $5 monthly discount to customers enrolled in its autopay offering. To qualify, customers were required to use a debit card or a bank account as their autopay method—credit cards were ineligible.
However, a kind of cheat code had emerged. Some savvy customers discovered they could register a valid debit card or bank account to secure the discount, then manually pay their balance with a credit card before the scheduled autopay date. Because the bill was already paid, T-Mobile didn’t process the automatic debit, but the customer still received the discount.
Losing the Discount
As of last week, these customers will lose their monthly discount if they make an early one-time payment on their bill using an ineligible payment method, such as a credit card. T-Mobile has apparently decided that avoiding interchange fees outweighs the value of keeping customers enrolled in autopay, despite the many benefits the subscription model provides.
“Autopay itself delivers the bulk of the benefits to the merchant,” said Don Apgar, Director of Merchant Payments at Javelin Strategy & Research. “They save the cost of generating a bill, mailing it, and then waiting for payment. Even in our digital age, where you can create a PDF of a bill and email it, they still have to wait for you to pay it. Autopay even enables the merchant to put a fine point on their revenue forecast, because they are taking the money from me on an established date, not waiting for me to send it.”
Pushing Them Elsewhere
The strategy hinges on the assumption that T-Mobile customers who use credit cards almost certainly also have bank accounts. The gamble for the carrier is that these customers will be willing to switch to alternative payment methods rather than opt out of autopay—or worse, switch to another carrier.
“It’s no secret that rewards cards and business credit cards have high interchange costs for merchants,” Apgar said. “By limiting payment options to debit and ACH, they keep those costs down.”
