The introduction of new NFC and EMV-enabled payment cards has forced merchants to upgrade their payment terminals since last 2015. However, it seems that upgrade brought other unwanted changes, such as an increase in debit transaction fees.
Processing Payment Cards Become More Expensive With Higher Fees
Any merchant wants to attract as many customers as possible, which also means they will need to support the most common payment solutions. Plastic payment cards — credit, debit, and bank cards — are the most common form of payment all over the world, next to cash.
But the payment industry is coming to change, as card issuers have come up with new types of security and functionality to make consumer payments even more convenient. EMV chips on plastic cards add another layer of security and prevent hackers from stealing the Track 1 and 2 data from the credit card when swiping. NFC capabilities, on the other hand, allow for contactless payments wherever supporting terminals are found.
Unfortunately, there is a price to pay for these extra features, and merchants will be footing the bill. An article on Zerohedge points out how the payment terminals deployed as of October 2015 are set to increase transaction processing costs for all debit transactions. This means that any card payment will cost the merchant more than before, as the data processing company wants to maximize their revenue.
It does not matter how consumers use their payment cards, though, as all types of debit transactions are subject to higher fees. Close to two-thirds of all payment terminals at smaller retailers are not set up correctly, as the installed software favours Visa and Mastercard debit-payment networks over competitors. For the merchant, this means the most expensive networks are available to consumers, rather than the cheaper options.
NRF Senior Vice President Mallory Duncan told the media:
“Many of the systems were set up to the most expensive form of routing the transaction, which is typically a Visa. While the terminals’ software can be updated to promote lower-cost debit networks, that may require the readers to be recertified, a long and costly process.”
To put this news into perspective, the additional fees can add up to $7,000 USD per year for a small business. But these issues go well beyond SME’s alone, as Wal-Mart is affected by this change as well. The retail giant filed a complaint in New York state court on May 10th.
Bitcoin Provides Transaction Fee Transparency
This stunt by data processing companies, Visa, and MasterCard goes to show how little transparency there is in traditional finance. Consumers will not directly feel the effects of these additional charges, although retailers may be forced to increase their prices if nothing is done about this payment structure.
Bitcoin, on the other hand, provides complete transparency when a transaction is made. In fact, the transaction fee is paid by the sender, not the recipient, which makes it free for retailers to accept Bitcoin payments. However, when converting Bitcoin to fiat currency, there will be a small fee involved, which is charged by the exchange or payment processor in a transparent manner.
What are your thoughts on these higher fees due to new payment terminals? Let us know in the comments below!
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