U.S. Merchants Pay the Highest Card Acceptance Costs in the World, a CMSPI Report Contends

Merchants in the United States paid $224 billion in card-acceptance costs in 2023, the highest toll for merchants in any country in the world, according to payment consultancy CMSPI’s State of the Industry Report. Interchange fees alone accounted for $143 billion of that total.

Since 2009, U.S. merchants’ like-for-like payment costs have increased 34 basis points. In addition, increased e-commerce spending since 2019 has resulted in an estimated $2.4 billion per annum increase in interchange and network fees, the report says.

“Payment acceptance costs are very high for merchants and are growing,” Callum Godwin, chief economist at CMSPI says by email. “In particular, the U.S. has become one of the most expensive credit card payment markets, and that’s in part due to the fact that the tender mix has become more expensive and regulatory approaches in the U.S. have been lighter-touch than in Australia and the EU.”

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

Overall, the U.S. has the highest card acceptance costs of any country, followed by Japan and Mexico, the report says.

Accounting for this result is limited network competition in the credit card market, Godwin adds. By comparison, competition between networks has mitigated rising interchange and network debit fees, according to the Federal Reserve data, he says.

In addition, the meteoric growth of e-commerce across key payments markets has compounded payments costs and complexities for merchants, according to the report. While ecommerce growth has leveled off from its meteoric rise between 2019 and 2022, annual growth is still averaging an estimated 41% in many counties, the report says.

A big driver of e-commerce volume is mobile devices. About 54% of all e-commerce transactions globally were made using a mobile device in 2022. The difference in interchange fees for card-present and card-not-present, which includes e-commerce, is 21 basis points for credit cards and 58 basis points for debit cards, CMSPI says.

In response to CMSPI’s findings, the Electronic Payments Coalition, which represents financial institutions and card networks, counters that it costs merchants less to accept cards than cash.

“Interchange has remained virtually flat for nearly a decade at less than 2%,” an EPC spokesperson says by 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.” 

The MPC released a statement Tuesday saying the CMSPI report shows the financial impact card-acceptance fees are having on merchants and underscores the need for Congress to bring competition to the payments market as soon as possible.