47Credit card processingFacts, Statistics, And Trendsevery online merchant should know

Chapter 1 Outlook

From what online credit card processing involves to who the players with skin in the game are, what the credit card market looks like, and what the state of online payments is today, here's an overview of what you need to know if you are thinking of taking your business online or setting one up from scratch.

1A. The credit card market today

  • The players and the playing field

    The players and the playing field
  • The Credit Card Market

    millioncredit cardholdersin the US.
    CFPB Consumer Credit Card Market Study
  • Worldwide credit card circulation

    14.4 billion credit cards
    in the world (as of 2017)

    Worldwide card circulation
    The Nilson Report
  • Top card networks in the U.S.

    Top card networks in the U.S.
    The Nilson Report
  • Who issues credit cards in the US?

    Organizations responsible for the funds do.

    A bank, in most cases. Although, some financial institutions like American Express, for example, operates as issuer and network.

    Who issues the credit cards in the US?
  • Number of active credit cards/person

    Card-holding consumers with average credit scores (620+) have atleast
    4 active credit cards.

    CFPB Consumer Credit Card Market Study
  • Did you know?


    applications for credit cards/day

    (US Consumers)
    CFPB Consumer Credit Card Market Study
  • Consumers are using their credit cards more than they did

    Average Credit Balance


    The highest it's been since

    CFPB Consumer Credit Card Market Study
  • Online payments are growing

    (2013 to 2017)

    Online payments in the US have grown 4 times as much as retail payments

    It has grown by ~64% in the last four years.

    US Census Bureau News 2017
With the average consumer using more than one card at a time and online payments growing four times faster than retail payments, the credit card market is booming.

1B. How are online sales doing?

  • Online sales are strong

    (U.S. Consumers - last year)

    say they have made at least one online purchase in the past 12 months.


    made three or more online purchases in the last year.


    say they have increased the frequency of their online purchases in the last year.

    American Express Digital Payments Survey
  • Online sales are strong


    Number of
    online transactions per person per year.

    KPMG Global Online Consumer Report
  • What are merchants saying?

    Compared to previous years, 71% merchants say

    Annual Sales (online and mobile)
    are increasing
    American Express Digital Payments survey
  • A look at spending habits

    U.S. Consumers spend

    12–18% MORE

    when using credit cards instead of cash for purchases

    Dun and Bradstreet survey
Online sales are growing everyday, it's the perfect time to take your product or service online if you haven't already!

Chapter 2 Safety

Arguably the biggest question on a merchant's mind. Is online credit card processing safe? The truth is there are nuances to consider before you decide. While the data reveals that online attacks and friendly fraud are both getting worse by the day, the tools and infrastructure to combat them are getting sharper. The issue is how much the tools cost and how difficult it is to keep up with regulation that is constantly being updated. What does the state of fraud mean for small businesses? Where does it leave your customer relationships?

2A. The fraud panorama

  • Fraud trends in the U.S.

    America is responsible for about a quarter of the global card transaction volume. But, it accounts for nearly half of worldwide credit card fraud.

    If you are selling in the U.S. Think about fraud

  • A look at the numbers

    The costs of credit card fraud have increased by


    (U.S. 2013 to 2017)

    Federal Trade commission's' Consumer Sentinel Network Data Book, 2017
  • Online vs in-person fraud

    The scales tipped in 2016 for the first time in credit card history

    Online fraud accounted for 58% in 2016

    Online vs in-person fraud
    Federal Reserve Payments Study — 2017
  • Does the size of your business matter to a fraudster?

    The size of your business doesn't matter
    to the online fraudster.

    Attacks targeting businesses with less than 250 employees are expected to grow in 2018.

    Internet Security Threat Report 2016
  • Not all online fraud is created equal

    Routinely reported friendly fraud rates


    (Online merchants – 2016)

    Friendly fraud is the case of a customer receiving a service only to provide invalid card details or false information.

    Solving the CNP False Decline Puzzle — Ethoca Research Report
  • Chargebacks contribute to fraud too

    Friendly fraud = Chargebacks

    Online Merchants Chargeback losses


    This number is expected to be 4x larger in 2020.

    Payment Fraud Outlook 2020
Fraud is nuanced. It can manifest as an attack or a chargeback, and it affects all businesses, big and small.

2B. Does safety impact customer relationships?

  • Consumers don't believe their information is safe

    Only 1/10 Americans are 'very confident' that websites are capable of keeping their credit card information secure.

    Pew Research Center Survey
  • Did you know?


    consumers make payment decisions based on which payment method is most secure.

    Cardtronics Health of Cash, 2017
  • Security concerns can impact sales

    say they have abandoned an online purchase because they did not feel their payment would be secure.

    (Consumers who have made three or more online purchases in the last year)

    American Express Digital Payments Survey
Customers are aware of how vulnerable their credit card information is. Your customers need to be reassured that you're handling their information sensitively and responsibly.

2C. Fighting fraud

  • The most effective tools to fight fraud

    AVS Filters

    (Address Verification Service)

    CVV Filters

    (Card Verification Numbers)

    Rated by merchants in the U.S.

    Fraud Benchmark Study, CyberSource
  • Effective fraud tools are underused


    of merchants require customers to enter the CVV


    decline transactions when a verified billing address has not been provided.

    American Express Digital Payments Survey
  • Compliance regulations are frequently updated

    62% of financial service firms are expecting regulators to revise regulatory information in 2018.

    (22% are expecting new regulation)

    Cost Of Compliance Study, Thomson Reuters, 2017
  • Keeping up with regulations is difficult

    Only 31% of
    businesses outsource their compliance to a third party.

    Cost Of Compliance Study, Thomson Reuters, 2017
  • Does it make sense to outsource compliance?

    Of the businesses who outsourced compliance in 2017, the 38% said it was because of the rising cost of compliance.

    (This number was 24% in 2016)

    Accenture Cost of Cybercrime study 2017
  • Does it make sense to invest in security intelligence?

    Investing in security intelligence systems saved online businesses $2.8 million in 2017

    Accenture Cost of Cybercrime study 2017
To quote Visa, "Finding the right tools to automatically screen for fraud is key to achieve the right balance among minimizing losses, maximizing revenues, and controlling costs."

Chapter 3 State

Credit cards have been a go-to payment method since long before the internet was around. This is slowly changing (finally). Mobile payment adoption is on the rise, e-wallets are predicted to take over the online payment market in the next decade or so, and direct debit payments are a preferred payment method in Europe. Does this mean it is not worth accepting credit cards in 2018? The answer is more intricate than you might think.

3A. Multiple payment methods matter

  • Cash on the decline


    of merchants say that they are very likely to go completely cashless in the near future.

    American Express Digital Payments Survey
  • Check payments are on the decline

    By 2018,
    check payment volume
    will reduce

    Nilson Report, Growth in Purchase Transactions 2009 – 2019
  • Did you know?


    people like having the ability to use a variety of payment methods when making a purchase.

    Cardtronics Health of Cash report
  • Payment methods are important to customers

    (Of the consumers who make an online purchase at least once a week)

    73% reveal that the type of payment a business accepts impacts whether they will buy from that business.

    JP Morgan Chase Report — The Intersection of Payment and Commerce in a Digital World
Multiple payment methods have always mattered to customers. While cash and check used to be preferred means of payment, though, the trends are changing.

3B. Alternative Payment Methods

  • How are alternative payment methods doing?

    E-wallets will grow the most as a payment method in the next five years

    (Compared with bank transfers, cash on delivery, charge cards, debit cards, PostPay, PrePay, and others)

    WorldPay, Global Payments Report Perview
  • E-wallets are the future, but they're not there as yet

    (As of 2018)

    Only 16% of
    consumers have ever used e-wallets.

    JP Morgan Chase Report — The Intersection of Payment and Commerce in a Digital World
  • PayPal is the e-wallet of choice

    is the most recognized and used online checkout service

    77% of the cardholders in the USare familiar with the service.

    62% of the cardholders in the US are familiar with and are currently using the service.

    69% of consumers believe Paypal's technology is better at protecting their financial information.

    Globe News Wire Survey 2016
  • Credit cards are more popular than ever


    Credit card payments registered the highest growth rate


    among the core payment types.

    Federal Reserve Payments Study 2017
  • Can cards compete with alternative payment methods?

    Credit Cards are expected to be the e-wallets' only serious competition over the next five years.

    Federal Reserve Payments Study 2017
  • Merchants predict credit cards will never be out of fashion


    merchants believe they will still be accepting credit card payments in five years

    JP Morgan Chase Report — The Intersection of Payment and Commerce in a Digital World
Only 38% of consumers feel that they are informed about e-wallets. Credit cards remain the go-to online payment method today.

3C. Location influences preferred payment methods

  • UnionPay owns the growing Chinese market

    While Visa, Mastercard, and American Express own the US market share, UnionPay owns the global credit card market, growing 51% from 2012 to 2017.

    (UnionPay went from 3,534 million cards in circulation to 5,341 cards).

    The Nilson Report — Payment Cards Worldwide
  • Direct Debit is Europe's preferred payment method


    of consumers with bank accounts in the UK have at least one direct debit mandate.

    BACS Direct Debit Consultation Outcomes 2017
If you plan on taking your business global, go with a payment gateway that supports the card networks and payment methods that are popular outside your primary region.

Chapter 4 Costs

Last (but certainly not least), there is the question of how much it's actually going to cost you to accept payments online. Apart from the obvious costs that you will owe your gateway or merchant service provider (a cut of which will go to all the players we met in Chapter 1), there are the not-so-obvious costs that you need to plan for: from accounting to a checkout experience and ever-dreadful chargebacks.

4A. The usual suspects

  • A breakdown of credit card processing fees

    1. Non-negotiable fees

    An assessment fee is owed to the card network facilitating the transaction (Visa or MasterCard, for example). An interchange fee is owed to the bank that issued the credit card being used for the transaction.

    Together, these non-negotiable fees work out to between 2% and 4% per transaction.

    2. Negotiable fees

    And finally, you pay your gateway or processor a markup fee.

    It's in negotiating the markup fee that you can minimize how much it costs to process credit cards.

    Here's a detailed guide to processing fees and how to get the best price for your payment processor →

  • The cost of credit card processing fees

    (Credit card processing fees paid by U.S. merchants in 2017)

    $7 billion
    The Nilson Report

4B. Additional overheads

  • Additional cost: Building a checkout experience


    merchants who saw an increase in online sales in 2017 said that an improved checkout experience played a significant role.

    American Express Digital Payments Survey
  • Additional cost: Bookkeeping

    Annual costs can be anywhere from


    40% of online small business owners say bookkeeping and taxes are the worst part of running a business. 47% said that the financial cost was the biggest burden bookkeeping posed to their business.

    NSBA Small Businesses Taxation Survey
  • Additional cost: Fraud


    of online revenue is at risk of fraud

    Customers aren't liable if a fraudulent or erroneous charge hits their credit card account. While this is a huge part of the reason consumers find credit cards safe to use and prefer them, it can be a cost on your business if it isn't planned for.

    Global Fraud Attack Index 2016
Credit Card Processing fees are just a small part of overall costs you should be thinking about if you want to accept credit cards.

4C. Chargebacks: Another cost to think about

  • What are chargebacks?

    A chargeback is a disputed transaction.

    When a customer initiates a chargeback, she is disputing that the charge was made and is asking for her money back.

  • Minimum cost per chargeback

    A chargeback can cost anywhere between


    (depending on your gateway; if a dispute escalates to arbitration, it can incur fees upwards of $500).

    Chargeback Fees: Processor Library for Merchants (chargeback.com)
  • Friendly fraud = Chargebacks


    cases of chargebacks are probable case of fraud

    Federal Reserve Bank of Kansas City, Research Working Papers 2016
  • Your chargeback rate will tell you if you're being scammed

    If your chargeback rate is
    Above 1%
    then you might be a victim of chargeback fraud

    If you divide your total chargebacks by the total number of transactions within a monthly period, you have your chargeback rate.

    The average chargeback rate is around 0.5–0.8%, with an industry-standard maximum of 1%.

    CyberSource Fraud Benchmark Study
  • The crucial difference between chargebacks and returns


    customers admit to filing a chargeback out of convenience

    (6 out of 10 customers admit that they're unaware of
    a store's return policy at the time of purchase.)

    Consumer Insights Survey (chargeback.com)
  • Chargebacks lead to losses

    It's impossible to
    put an exact number
    to chargeback losses.

    Chargebacks do incur losses. A partial picture of what these losses are is possible, and it's enough to conclude that chargebacks can significantly affect a business's bottom line.

    Federal Reserve Bank of Kansas City, Research Working Papers 2016
Chargebacks can eat into your profits. The good news is you can mitigate them with strong customer service, a crystal clear return policy, and robust fraud detection.