Blog June 11th 2024

The Complexity of Payments: A Driver of Costs or An Opportunity for Savings?

As complexity mounts, many merchants find themselves grappling to control their expenses, leading to unnoticed elevated fees. However, some merchants are ushering in a new era of payments optimization where embracing complexity drives savings, rather than cost increases.

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Christian Johnson

Senior Manager, Global Advocacy Manager

The grand finale to the trio-blog series, The Three Cs of Payments, is here. CMSPI’s Insights team has unpacked cost and competition within the payments landscape in previous blogs. In the final installment of this series, we delve into the complexity that shapes the day-to-day lives of payments managers worldwide. Are these intricacies truly a barrier to optimization, or do they create opportunities for improvement?

“Explain your job to me again…”

The realm of payments has always been labyrinthine – just try explaining interchange to a friend and you’ll quickly appreciate its intricacies. However, today, optimizing payments requires much more than a working knowledge of the payments supply chain. The market’s rapid evolution has introduced an array of new fees, products, and dynamics among payment partners, rendering it more costly and convoluted than ever before. As complexity mounts, many merchants find themselves grappling to control their expenses, leading to unnoticed elevated fees. In fact, a recent Consumer Financial Protection Bureau report found that prices tend to be higher for products that have more complex pricing structures.1 This article delves into three ways in which complexity inflates merchant costs and proposes a data-driven approach to rein in the breakneck cost increases.

The Careening Course of Payments

Navigating market changes can feel akin to steering through a storm, with the complexity of the environment often overwhelming efforts to reduce costs. Three market dynamics stand out amongst the rest:

  • Surge in Routing Factors: 
    Over the past five years, the number of factors influencing debit routing has more than doubled (Figure 1). Previously, routing challenges predominantly revolved around issuer regulation, customer authentication, Merchant Category Code, and transaction value. Nowadays, merchants must contend not only with these factors but also factor in channel of acceptance, PINless enablement, tokenization type, form factor, transaction thresholds by network, and interoperability of PINless networks across various token types. With these compounded complexities, merchants now require more extensive data, insights, and resources to establish and maintain optimal routing strategies than ever before.
  • PINless Enablement is Rising, Yet, Not Universally: While CMSPI’s data indicates a significant increase in Card Not Present (CNP) and Card Present (CP) PINless enablement post-clarification, certain card types across specific issuers may still require further assessment for PINless availability. Additionally, some acquirers are not certified across major PINless debit networks, potentially limiting merchants’ access to PINless networks even after issuers enable the technology.2

Figure 1. Card-Present PINless Routing Enablement by Issuer³

Source: CMSPI Estimates and Analysis.

  • Fluctuations in BIN Issuance: Prior to the PINless clarification, CMSPI observed heightened market churn in network availability. In the first half of 2023 alone, nearly 8% of PIN debit transactions occurred on cards where the available networks had changed. This pace did not slow, with ultimately 16% of transactions between January and December 2023 occurring on cards with altered network combinations. With shifts in network availability, merchants may witness their volume-based deals transitioning from optimal to suboptimal merely due to changes in issuer selection of available networks.

Figure 2. Proportion of Transactions Affected by BIN Network Changes⁴

Source: CMSPI Estimates and Analysis.

Clarity Amidst Complexity: Leveraging Data and Establishing Baselines

In the fog of market upheaval, identifying and isolating optimal payment strategies can seem like an insurmountable task. However, there are three strategies leading merchants are using to create clarity:

  • Establish Multi-Layered Partnerships: Global networks commanded a collective market share of more than 85% of U.S. card spending in 2023.5 While network exclusivity deals may initially entice merchants with substantial benefits, CMSPI analysis indicates merchants may achieve significantly greater average cost savings per transaction by pursuing complex, multi-layered routing strategies compared to exclusive deals with one network (this can differ on a case-by-case basis). By embracing the complexity of multi-stakeholder incentives, merchants may realize significantly higher savings than opting for the ‘path of least resistance’ or accepting the ‘Big Check.’
  • Granular Analysis of BIN Availability: To leverage maximum volume in debit network negotiations, merchants must perform a deep dive of their data. Relying solely on annual debit card network availability averages is no longer sufficient as BIN issuance changes and fee escalations can swiftly render an optimal strategy obsolete. Moreover, PINless performance varies widely by card type and issuer, necessitating a tailored strategy to each unique scenario. Regularly evaluating network availability at the BIN level and adjusting routing tables in response to changes in network availability and PINless enablement can add lasting value.
  • Negotiation Guardrails: With networks under increasing pressure to secure volumes, contracts often contain stringent terms that may lead to long-term cost increases. These terms may include clawbacks or penalty fees associated with unmet volume or priority commitments. Merchants should consider negotiating for flexibility in contracts to safeguard against fluctuations in network availability and consistently review their rates, as routine monitoring is imperative to staying abreast of changes.

By adopting a data-driven approach and leveraging granular insights, merchants can navigate the complexities of the payments landscape, turning intricacy into strategic advantage.



1 CFPB Publishes Research Finding Higher Price Complexity Leads Consumers to Pay More | Consumer Financial Protection Bureau (

2 To read more about the Federal Reserve’s 2022 announcement and the subsequent 2023 effective date, please follow this link

3 CMSPI Estimates and Analysis

4 CMSPI Estimates and Analysis

5 Nilson 1257


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