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2023 Payment Processing Outlook editorial staff
Updated Feb 01, 2023

As high transaction fees make some businesses balk at credit card payments, person-to-person apps and cryptocurrency gain popularity

An overheated economy, strained supply chains, and the outbreak of war in Europe have sharply spiked inflation. At the same time, Covid-19 has accelerated changing consumer habits. The pandemic also created greater opportunities for financial tech startups to disrupt the traditional banking space as more and more transactions were conducted online.

These market conditions have increased Americans’ dependence on credit cards and fostered the rise of new payment technologies like peer-to-peer (P2P) platforms, contactless payments, and cryptocurrencies. However, these promising new payment methods aren’t yet universally accessible or accepted by all shoppers or sellers.

To better grasp the current retail environment and gauge which payment methods are disrupting the market, conducted a study of more than 1,500 consumers and small business decision-makers.

Key takeaways:

  • Though most consumers prefer credit or debit, a quarter of small businesses don’t accept credit cards, primarily due to high processing fees.
  • More than half of merchants who do accept credit cards incentivize customers to use other payment methods, and two-thirds mark up their goods and services to offset transaction fees.
  • The average consumer says they use credit or debit for about 75 percent of their purchases. About one in 10 say they haven’t used cash in the last 12 months.
  • Eight in 10 consumers use P2P platforms like Venmo or Zelle, and more than half of smaller companies now accept them for purchases. Many merchants say the processing fees on P2P transactions are less than credit card fees.
  • Cryptocurrency payments are accepted by 23 percent of small businesses, though just 4 percent of shoppers have used cryptocurrency to make purchases.

Credit remains king for consumers

Cash use has declined over the last few years, as Covid-19 greatly increased online transactions and more digital payment options became available. From 2019 to 2020 alone, the share of payments executed in cash dropped by more than 25 percent in the United States.

Credit cards have long been the nation’s preferred non-cash payment option and remain popular with consumers today. In fact, 99 percent of our study participants had at least one credit or debit card, and more than two-thirds had accounts with multiple card companies.

For everyday purchases, the consumers in our study used credit cards more often than any other payment method. Cash and P2P apps were the second and third most common methods, and just four percent of consumers had made a purchase using cryptocurrency.

Percentage of consumers who use each payment method





P2P or contactless payment apps


Personal checks


ACH or echeck




For frequency of use, credit cards again represented the dominant method: the average consumer put nearly three in four purchases on their credit or debit card. Conversely, Americans said they only use cash 12 percent of the time on average — and 10 percent didn’t spend any paper money in the past year.

Consumers: what percentage of the time do you use each of these payment forms?





P2P or contactless payment apps


ACH or echeck


Personal checks




Note: Figures may not add up to 100% due to rounding. 

Consumers also named bank cards their most indispensable tool: four out of five said if they could only choose one payment method to use, it would be credit or debit cards.

Although credit and debit cards are indispensable for consumers, they’re a bit more complicated for some businesses due to the fees associated with credit card transactions.

Credit is complex for businesses, especially as costs rise

Since credit cards are so popular with shoppers, most retailers choose to accept them, but processing fees cut into their revenue and force some to increase their prices. In an economy already wracked by inflation, this greatly pressures profit margins.

Our study found that credit and debit cards are the most widely-accepted form of payment, yet more than a quarter of small businesses currently don’t take them.

Which payment methods does your company accept from customers?

Credit or debit cards




Contactless or P2P payment apps(like Venmo, Apple Pay, Google Pay, or PayPal)


Personal checks


Automated clearing house (ACH) transfer/eChecks






Nearly 40 percent of those who do not accept credit said that high transaction fees prevented them from accepting consumers’ favorite payment method.

Retailers must pay interchange fees to the cardholder’s bank, assessment fees to the card company, and processing fees to the service that clears the transaction. This amount fluctuates between processing services but usually totaled between two and four percent of sales prices for those in our study.

Visa and Mastercard tend to charge lower fees than Discover, while American Express charges most of all of the cards included in our study. This explains the variance in point-of-sale acceptance. Nine out of ten businesses represented in our study accepted Visa or Mastercard. By comparison, 67 percent accepted American Express, and 57 percent took Discover.

Most of the merchants that didn’t accept American Express or Discover said it was due to the higher transaction fees associated with these providers. Besides declining pricier providers, companies avoided processing fees by incentivizing other payment methods and passing the costs along to consumers by raising prices.


The percentage of companies that accept credit cards offer incentives or discounts to customers who pay with other methods.


The percentage of companies mark up prices of goods or services to offset credit card processing fees.

Credit card fees quickly add up for vendors – the median monthly expense was $300 for the business leaders in our study. Such costs disproportionately impacted the smallest enterprises in our study, leading only 17 percent of solopreneurs (companies with only one employee) to accept credit card payments.

While some small companies might not take credit cards because they are just starting out, some had no plans to start accepting them any time soon. Among the companies that don’t accept credit cards, fewer than one in three plan to begin accepting them over the next year.

Will you begin accepting credit card payments in the next 12 months?







Note: Among small businesses not currently accepting credit cards

As inflation continues to rise and fees make credit cards less attractive to sellers, how will businesses attract customers who rely on cash less and less?

The rise of P2P and contactless payments

The public initially embraced P2P apps like Venmo and CashApp as a means to send money among friends: “Venmo me” has become an everyday phrase for friends splitting restaurant tabs or roommates paying for utilities together. Increasingly, these platforms are also used to pay for business goods and services.


The percentage of small businesses that accept P2P payments.

The percentage of users who make purchases from businesses with contactless/P2P payment apps.


More than half of small businesses now accept P2P or contactless payments, including two in three solopreneurs. For business people who provide services to individuals, such as hair stylists, repair persons, or tutors, P2P apps like Venmo for business can be convenient ways to accept and track payments.

Additionally, of the many consumers who have P2P or contactless payment apps, 84 percent use them to make purchases from businesses. These numbers reveal widespread public adoption, but also potential for additional growth.

Percent of businesses accepting payments

Percent of consumers using payments

Apple Pay55%20%
Google Pay54%16%

As they’ve expanded their offerings, new financial service providers like CashApp have made impressive inroads with consumers and businesses. For instance, Venmo offers debit and credit cards, and PayPal offers business loans. CashApp’s parent company, Block (formerly Square), even launched its own bank in 2021.

However, traditional banks and credit card servicers have been slow to respond to these ambitious upstarts. Despite their financial resources, recent studies showed that only 11 percent of banks have any plans to acquire fintech companies, and just 7 percent have set up their own fintech innovation projects. The lack of response from traditional banks means that these newer fintech companies could gain an even larger market share, especially among younger consumers who are digital natives.

Fee comparison: P2P versus credit cards

While P2P apps are convenient and easy for consumers, they can also lower transaction costs for small businesses. They don’t require additional equipment or processors, which cost merchants money. Sellers only need a smartphone app to accept many P2P payments.

Some merchants are turning to these newer platforms because of their simplified pricing models. Almost half of the businesses in our study reported that P2P and contactless payments cost them less than credit card transactions, which include interchange, transaction, and assessment fees. Around 32 percent said the costs ended up being the same. It’s important to keep in mind that debit card fees are typically much lower than credit card payment fees.

Credit card fees for merchants

P2P fees for merchants

CompanyInterchange feesAssessment feesCompanyTransaction fees
MasterCard1.35% to 3.25% + $0.100.13-0.14%Venmo for business1.9% + $0.10
Visa1.15% +$0.25 to 2.70% + $0.100.14%Cash App for business2.50%
Discover1.56% to 2.40% + $0.100.13%Paypal3.49% + $0.49
American Express1.43% to 3.0% + $0.100.15%Google Pay, Apple Pay, ZelleNo additional fees for merchants besides applicable credit card fees

Though P2P and contactless payments hold great promise for both consumers and businesses, another emerging financial technology may also benefit both groups.

The cryptic future of crypto purchases

Though public awareness of cryptocurrency has soared in recent years, the cutting-edge assets are still mysterious to many consumers and merchants.

One in three American adults now own crypto, but far fewer use cryptocurrencies to make everyday purchases. When crypto is used for transactions, however, its decentralized nature keeps processing fees low for sellers: usually between 0.5-1 percent.

That minimal rate makes the method attractive to merchants, and nearly a quarter of small businesses already accept the blockchain-based tokens.


The percentage of small companies accepting cryptocurrency as payment.

Enterprises that do not yet take crypto often listed logistical shortcomings or lack of familiarity as their primary obstacles.

Why don’t you accept cryptocurrencies as payment?

I don’t know enough about them


The values are not stable


My payment processor or POS system doesn’t offer this


I don’t want to complicate my accounting


I don’t want to deal with the hassle of setting it up




Additional knowledge and technical integration would eliminate several of these issues, so the future may find crypto more often used as currency –  the purpose for which it was conceived.


Some of the same economic factors spurring virtual payments and online shopping have also fueled the global inflation rise, making credit card fees less tolerable for merchants.

It’s a dilemma affecting many small businesses. Consumers demand the convenience of cashless transactions, but processing costs cut merchant revenues or force price hikes in a hyper-competitive climate.

Alternate payment methods rooted in financial technology may offer solutions for both sides. Contactless payment, P2P platforms, and cryptocurrency transfers have gained traction as they lower business transaction costs. Acceptance is not yet universal and doesn’t rival credit card saturation, but these fintech companies could prove to be seriously disruptive to traditional financial service providers.

As the public relies more on digital wallets and merchants better understand crypto, those methods will seize larger market shares. In turn, credit card companies will undoubtedly fight back. Whether that means mergers, hybrids, or more competitive pricing – and whether cash will survive another generation – remains to be seen.

Our data 

In May 2022, conducted two online surveys. One survey targeted 751 American business leaders ages 18-85 who were involved in choosing or managing their companies’ credit card processing system. 396 business leaders were male and 355 were female. All companies represented in our survey had 100 or fewer employees. We conducted another study of consumers who lived in the United States. They ranged in age from 18 to 93. Approximately 50% were male and 50% were female.

Image Credit: jacoblund / Getty Images editorial staff
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