Despite Regulation, Global Card Fees Continue to Grow and Threaten Merchants (Insights Magazine, July 2021)

02nd August 2021
Martha Southall
Martha Southall

CMSPI analysis suggests that overall fee changes scheduled for 2021 and 2022 could generate over $1.1 billion in additional annual costs for U.S. merchants.

Such news is not confined to North America – regardless of local competition, consumer preferences and regulation, merchants around the world are battling a rising tide of card acceptance fees. For retailers attempting to navigate numerous fee changes across their markets, it can be easy to see each increase in isolation, but a wider perspective is important. In this article, we take a historical and global view of the pattern, exploring how national regulatory approaches have interacted with fee increases to make payments acceptance costs more complex than ever.

Why Do Fee Changes Differ?

Multinational merchants know all too well that fees are increasing, and that each new or amended card fee announcement affects their markets differently. Part of the explanation for this lies with regulation. The merchant service charge (MSC), known as the merchant discount rate in the United States, is a per transaction fee paid by merchants to accept card transactions. The fee is composed of interchange, network fees, and acquirer margin. Of the three components that broadly make up the MSC, a common choice has been to regulate interchange, which is paid to the card-issuing bank and is typically the largest of the three fees. 

Regulation shapes the behavior of all actors within the payments supply chain. However, each jurisdiction legislates differently, and therefore when costs increase they do so in a way that is increasingly localized, channel-specific and difficult to reconcile. 

Want to read the full article? View July 2021’s edition of Insights Magazine below:

Insights Magazine from CMSPI | July 2021 Edition

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