Peppercoin says it has signed a letter of intent with MasterCard and the two firrms will work towards an alliance to accelerate card usage for small payments at the online and physical point of sale.

Under the partnership deal, merchants who enroll in the Peppercoin micro and small payments programme will receive a reduction in Peppercoin fees for MasterCard transactions.

Art Kranzley, global product group executive, MasterCard International, says "The micro and small payments market represents a significant growth opportunity for card-enabled transactions."

The Peppercoin micropayment system cuts the costs of processing small value payments for banks and card companies by aggregating the value of multiple transactions. It also provides merchants with built-in loyalty programmes designed to encourage frequent and repeated card use by consumers for small payments.

Kranzley adds: "Peppercoin is an ideal choice as a service provider. The company has been working closely with merchants and financial institutions to provide an innovative technology that works within the existing payments infrastructure."

Massachusetts-based Peppercoin has previously inked a similar deal with SunTrust Merchant Services, a joint venture between SunTrust Banks and First Data Corporation, as well as a referral agreement with the largest merchant acquirer in the US, Chase Merchant Services.

Research released by Peppercoin and market research company Ipsos-Insight found that an estimated 45 million US consumers are willing to use credit or debit cards for purchases of $5 or less, up 23% from September 2004.

Additionally, nearly 20 million Americans have purchased something online for less than $2 in the past year, up nearly 29% from September 2004 and 350% from October 2003.