Merchant processing fees down in US as interchange caps take hold

Source: Nilsen Report

General purpose and private label credit, debit, and prepaid cards generated $4.409 trillion in payments for goods and services in 2012, and U.S. merchants paid $66.51 billion in fees to handle that business. Merchants paid $69.81 billion the prior year on $4.105 trillion in purchase volume, according to The Nilson Report, a leading payment industry newsletter.

The weighted average of fees as a percentage of purchase volume from Visa and MasterCard credit, debit, and prepaid cards, American Express credit and prepaid cards, Discover credit, debit, and prepaid cards, EFT system PIN-based debit cards, and private label credit and debit cards was 1.51%. The weighted average was 1.70% in 2011.

"The decline was due to imposition of price ceilings on debit card transactions beginning October 1, 2011," said David Robertson, publisher of The Nilson Report. Fees tied to credit cards grew in 2012.

Visa, MasterCard, and EFT system debit cards generated $1.976 trillion in purchase volume, accounting for 44.8% of all purchases last year. However, these cards generated only 22.5% of the total fees paid by merchants.

Debit card fees fell to $14.99 billion in 2012 from $23.71 billion in 2011, even though purchase volume grew to $1.976 trillion from $1.847 trillion.

Processing fees are paid in compensation for credit risk, network services, and all related value-added services provided by acquirers of card transactions from merchants

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