Mercator Blog

Merchants Find Savings on Transaction Processing Costs
Date: February 5, 2018
Research Team
Merchants may think that the card networks are the only game in town besides checks and cash as ways to accept customer payments. For years, shoppers have welcomed the option to use a debit card for convenience or a credit card to defer payment and play the float or to extend payments over several months, paying interest on that debt. Card issuers have capitalized on this behavior with a proliferation of card offers through high-visibility marketing campaigns and incentive programs. Not surprisingly, credit and debit cards make up the largest payment category in the U.S. market.

Merchants have enjoyed higher average ticket sales due to credit cards but have grown increasingly frustrated with interchange and related fees, which they have limited ability to negotiate. Although there are not many alternative payment acceptance options, alternatives to the card networks do exist and more are emerging. Merchants, especially small businesses, can save money on interchange and related fees thanks to some existing technologies as well as more recent developments from payments providers involving application programming interfaces (APIs). In fairness, however, merchants need to remember that they do get many value-added benefits, including a payment guarantee, by routing purchase transactions through the card networks. But merchants also need to consider possible cost savings.

The research report, Payment Channel Alternatives to the Card Networks for Merchants, describes the ways that consumers can pay for transactions in stores and how merchants can integrate these payment acceptance methods into their point of sale (POS) systems.