The Rising Cost of Card Payment Processing: Causes, Consequences, and Solutions

Businesses today need to be prepared to manage the costs of all types of payment processing, including debit and credit cards. However, a combination of changes in consumer spending habits, an increase in fraud attempts, and rising transaction fees card transactions are creating unique challenges for businesses. 

Here’s a look at the causes, consequences and solutions for the rising costs of card payment processing today: 

Credit Cards Remain Dominant in the Payments Space 

A few years ago, credit cards had a stronghold on the payments market. Cards were responsible for 62.3% of US consumer payments in 2017, with only a fraction of payments coming from other options: 

Many in the finance and payments industries anticipated that credit card companies would lose their dominance in the payments space within a few years. The growth of PayPal was an early forerunner, then came Apple and Samsung Pay, and other big players like Google and Amazon developing their own payments platforms. Retailers like Walmart and Starbucks did the same. 

However now in 2021, very little has changed. Debit remains the preferred payment option among consumers. 

According to PSCU, a credit union service organization, contactless payments have more than doubled since the beginning of the pandemic. However, the majority of this growth is not in alternative payment methods. Most contactless transactions are still debit or credit payments, so Visa and MasterCard are earning on fees with each transaction. 

Debit is also a source of merchant frustration

Combined purchase volume is down about 7% YOY in Q2 2020 driven by declining credit cards; debit now leads.