an article writen by David G.W. Birch, an internationally-recognised thought leader in digital identity and digital money
Last year, US merchants paid a record $161 billion in processing fees to accept nearly $11 trillion in card payments according to the Nilson Report, which also notes that the total value of fees was up 17% from 2021, even though purchases for goods and services tied to all card payments grew by only 12% year-over-year because credit card spending made up a larger share and credit cards cost merchants more to accept. Credit card spending in fact grew by 19% in 2022, more than three times growth rate for (less costly) debit cards. The management consultants Bain forecast peak card (in the US market) in 2029, although I think it might come sooner than that.
With profit margins being squeezed, merchants have responded by surcharging for card use (payment consultancy TSG reckons between that between five and ten per cent of the eight million card-accepting small businesses in the US now charge fees for credit card usage), by discounting for cash or by encouraging customers to bypass cards completely and switch to alternatives such as payments direct from the customer’s bank account to the merchant’s bank account.
With big billers such as Verizon, AT&T and T-Mobile asking customers to shift monthly payments from their credit cards to bank accounts, they are leading a trend that will only grow stronger as instant payments, open banking and digital wallets gain traction. It seems to me that there are two key factors that will determine the shift from cards to account-to-account (A2A) payments and these are consumer protection and customer rewards.
As Variable Recurring Payments (VRP) and request-to-pay (R2P) services evolve, merchants will undoubtedly start to shift volume in their direction. Forrester expect the number of consumers using open banking services in the UK to treble of the next five year and for payments driven by open banking to account for a tenth of all electronic payments by 2027, with growth powered by VRPs. If merchants develop their strategies to integrate VRP/R2P into their apps, Bain’s forecast of peak card in 2029 might actually turn out to be conservative.
Read the full article here
Banking 4.0 – „how was the experience for you”
„So many people are coming here to Bucharest, people that I see and interact on linkedin and now I get the change to meet them in person. It was like being to the Football World Cup but this was the World Cup on linkedin in payments and open banking.”
Many more interesting quotes in the video below:
