Will Transaction Fees in Retail Payments Go Extinct?


The majority of the world’s 2.8 billion credit cards are issued by just four powerhouses, and within that, it’s really a fight among the top two: Visa and Mastercard. According to ShiftProcessing.com, over half the credit card market share belongs to Visa alone, considering it has 335 million cards in circulation.

It’s no surprise then that consumers and financial professionals alike were caught by surprise in November, when Amazon announced it is no longer accepting Visa cards in the UK, supposedly as the result of a rising “interchange” fee in a post-Brexit Europe. Merchants forked over $110 billion in credit card processing fees in 2020, and not only are these normalized fees a cost burden for ecommerce marketplaces and small businesses that rely on easy and low-cost online sales, but their utility and acceptance are being questioned with the rise of fintech innovations, alternative payment methods, and more.

If Amazon’s distancing from Visa sticks, and with options like “buy now, pay later,” direct-to-bank transfers, and even artificial capital like crypto for payment, will the mega credit card companies’ duopoly be disrupted by alternative payment methods? David Shipper, a Strategic Advisor in Aite-Novarica’s Retail Banking & Payments group, says it’s likely the payment ecosystem expands, but the credit card giants shouldn’t be too worried.

Hamed Abbasi, Co-Founder & CEO of accounts payable and receivable software company Plooto, agrees; credit cards aren’t going away, or really even phasing out. But different markets show different adoption rates, and could lead to alternative payments finding their stride outside of the U.S.

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