Facts and Trends in the Credit Card Payment Industry

With the pandemic, the use of credit and debit cards became more popular. According to Digital Commerce 360, US e-commerce grew 44% in 2020 with respect to the previous year. Although the shopping trend has changed, the payment authorization process is still the same. The development of new payment terminals has accelerated during 2020 to meet the demand for secured contactless payment terminals. EPNA is a woman-owned payment processor located in Evanston, IL. EPNA underwrites under the US Bank. This past year we have facilitated new technology to help merchants accept contactless payments securely for in-person and e-commerce environments.

Credit cards are issued by a financial institution. Most banks issue cards with different brands such as Visa, Master Card. The most popular card brands are Visa, Master Card, Discover, and American Express. The process of authorizing or authenticating payments involves electronic communication between the merchant, the payment processor, the acquirer, and the card issuer. This communication gets started through a physical payment terminal or through a cloud-based payment gateway. Merchants pay for authorization fees as well as assessment fees established by the card brands. The overall transaction cost of credit cards involves assessment fees, interchange fees, and the processing fee.

For card-present transactions, chip authenticated card payments help avoid chargebacks and fraud liability. Visa announced that as of April of 2021, they will stop processing transactions in contactless magnetic stripe card readers. Other card brands have set deadlines as well. EPNA recommends that merchants enable contactless EMV payments (chip readers) as soon as possible. We have seen that approximately 60% of debit or credit transactions are processed within the Visa network.

Each card network classifies types of cards for different interchange rates. The factors that affect interchange are the card brand, the card type, the acceptance method (in person or card-not-present), and the industry type. As such, cards are classified as debit cards, consumer cards, rewards, and premium rewards cards, commercial and corporate cards. At EPNA, we develop different pricing methods and payment solutions tailored to the merchant’s needs. This allows us to process the cards at the lowest possible cost. For example, if a merchant takes mostly commercial or corporate cards, our Level III product optimizes these types of cards by 80-100 basis points, which represents significant savings to his/her operation.

Another trend seen during the pandemic is the ALL-IN-ONE software solution. We have noticed that merchants are not really thinking about the processor, and how this could affect their bottom line. Last year, we identified three businesses that had their payment solution integrated into their point of sale (POS). The payment terminals were not working properly, customer service did not support them, the funding was lagging 2-3 days, and the processing rates were not optimal. Our consultative support empowered these merchants to make the switch and separate the payment processing from their POS to improve liquidity, accept EMV contactless payments, and have someone available 24/7 to support their operation.

Content provided by Women Belong member Maru Braemer