US merchants pay highest card acceptance costs in the world, CMSPI report says – Digital Transactions

Merchants in the United States paid $224 billion in card acceptance costs in 2023, the highest fee for merchants in any country in the world, according to a State of the Industry report from consulting firm CMSPI. Interchange fees alone accounted for $143 billion of that total.

Since 2009, like-for-like payment costs for U.S. merchants have increased by 34 basis points. In addition, increased e-commerce spending has resulted in an estimated annual increase of $2.4 billion since 2019 exchange and network fees — we read in the report.

“The costs of accepting payments for merchants are very high and rising,” said Callum Godwin, chief economist at CMSPI he says in an email. “The US in particular has become one of the most expensive markets for credit card payments, and that’s partly because the offering has become more expensive and the regulatory approach in the US has been more lenient than in Australia and the EU.”

Godwin adds that effective card acceptance rates in the U.S. have risen from 1.36% in 2009 to 1.70% in 2023. “This analysis excludes the impact of volume growth over that period and shows that the average merchant is paying more today than ever before as credit fees continue to rise and cash volumes decline in the U.S. These increases present significant pain points for merchants,” he says.

According to the report, the United States has the highest card acceptance costs of all countries, followed by Japan and Mexico.

Reduced network competition in the credit card market is responsible for that performance, Godwin adds. By comparison, competition between networks has moderated rising interchange and debit network fees, according to Federal Reserve data, he says.

In addition, there has been a sharp increase e-commerce in key payments markets has increased payment costs and complexity for merchants, according to the report. While e-commerce growth has leveled off after its meteoric rise from 2019 to 2022, annual growth still averages about 41% in many countries, the report said.

Mobile devices are a big driver of e-commerce volume. About 54% of all e-commerce transactions worldwide were made using a mobile device in 2022. The difference in interchange fees for card-based and card-free transactions, which includes e-commerce, is 21 basis points for credit cards and 58 basis points for debit cards, according to CMSPI.

In response to the CMSPI findings, Electronic Payments Coalitionwhich represents financial institutions and payment card networks, says it costs merchants less to accept cards than to accept cash.

“Interchange has remained virtually flat for almost a decade, at less than 2%,” an EPC spokesperson says in an email. “Credit cards increase revenue for small businesses, as noted by the NFIB (National Federation of Independent Business), and are cheaper than the cost of accepting cash, according to retail analysts.”

This MPC released a statement Tuesday saying the CMSPI report shows the financial impact of card acceptance fees on merchants and highlights the need to bring competition to the payments market as soon as possible.