Merchant Credit Card Surcharging — The Future of Purchase Economics in the US

Small merchants are well-aware of the prevalence of surcharging: it’s become practically a necessity given inflation and the fact that merchant discount rates (swipe fees) are their #2 cost after labor, according to the Merchant Payments Coalition. In fact, while less than 5% of small & medium businesses (SMBs) surcharged in 2021, currently 34% of them do. There is also increasing evidence that large merchants are surcharging, and PSPs are increasingly being asked to accommodate this need on their platforms. While it’s understandable, surcharging is a policy that consumers dislike. So, they look for alternatives to cards to avoid them, including A2A methods (Venmo, Zelle, PayPal) and BNPL in cases when credit is needed. In the medium term, what will be the results of this trend? How will regulation and potential interchange caps impact surcharging? How might large merchants and big box stores jump on this bandwagon? How will widespread surcharging impact the economics of payments? Will it force card networks and issuers to rethink their incentive system, or will it lead APMs to increase their monetization efforts? At what point will we reach parity in cards vs. APM MDRs? This panel discussion will focus on the drivers of the surcharging trend, the challenges for merchants and the implications for card companies—all with an eye toward exploring which solutions can serve all players in this equation: merchants, consumers, and card networks.

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