Credit card payments have become very popular over the years, with more and more people opting to pay electronically instead of carrying bundles of cash.
In the U.S., credit cards accounted for around 28% of all payments made to merchants in 2021, while in Japan, the figure is slightly higher, with credit card payments making up 30.4% of the private final consumption expenditure between 2013 and 2022.
However, while merchants across the world are embracing credit card payment options, it has not been a straightforward endeavor. One would have expected that businesses which accept credit cards to reap more benefits from increased sales, but the truth is that sometimes the credit card costs have ended up eating into the merchants’ profits.
Current Credit Card Fees Are Exorbitant
On average, credit card processing fees cost merchants between 1.5% to 3.5% per transaction. A good number of businesses that accept credit card payments often opt to pass a portion of these fees onto consumers, hence the higher transaction fees when paying with credit cards.
Luckily, both merchants and consumers don’t have to bear the brunt of credit card costs anymore. The emergence of cheaper and more efficient payment technologies such as the one offered by Slash, a fully compliant cryptoasset payment solution based in Japan, is set to change the fate of small businesses and consumers.
But let’s first decipher why the current credit card payment model is broken.
Time to Cut Out the Middlemen
Last year, both Visa and Mastercard announced that they would be increasing their credit card processing fees for merchants. This increase will result in merchants coughing up an additional $502 million in fees annually, according to analysis by payments consultancy firm CMSPI.
While most consumers will likely downplay the effects the move will have on their purchasing power, it is more likely than not that merchants will ultimately pass on the cost to consumers. In other words, an additional cost to basic commodities, not to forget that inflation is still running hot and yet to stabilize near the U.S. Federal Reserve target of 2%.
“With small businesses and families already dealing with high prices on groceries and gasoline, this hidden credit card fee increase couldn’t come at a worse time,” noted U.S. Senators in opposition to the move by Visa and Mastercard.
It is also worth observing that most of the payment intermediaries that enjoy a significant market share are in the comfort zone. When was the last time a company rose to the ranks of Visa, Mastercard, American Express, or Discover?
Of course, this market dominance can partly be attributed to the early mover advantage these companies enjoy, but above all, they have established themselves as ‘monopolies’ with few to no challengers. However, on the brighter side, the status quo is changing; Fintechs are gradually expanding their product suite to include more cost-friendly payment options that serve the same purpose as credit cards.
Even more intriguing is the advent of crypto payment gateways, which are emerging as holistic solutions to the challenges civilization has constantly faced when it comes to realizing value while at the same time making a payment.
The Future of Payment Services
Imagine being able to make a payment or receiving a payment directly to a digital wallet without having to pay the exorbitant fees charged by service providers in this space? That’s the true promise of cryptoasset payment solutions.
Although still a nascent space in the payments innovation industry, cryptoasset payment systems are already redefining the world of payments led by the likes of Slash. This Japanese based payment solution features a non-custodial cryptocurrency payment gateway, allowing merchants to accept crypto payments such as the USDT or USDC stablecoins directly into a digital wallet.
More importantly, Slash’s crypto payment gateway services only cost between 0% to 2%, and can easily be integrated by small businesses through an API or QR code. This ease of integration essentially eliminates the need to go through multiple middlemen (bank and card providers), which is what normally raises the cost of credit card payments.
Additionally, unlike Mastercard or Visa where all the transaction fees are considered as the firm’s revenue, Slash’s cryptoasset payment ecosystem is run based on a decentralized governance structure. All the fees are redistributed back to the ecosystem, rewarding users who contribute to the network by staking the platform’s native token, SVL.
“Blockchain technology has the potential to digitize not only money, but also finance, so that people around the world can benefit from it. Individuals and businesses that own a Web3 wallet can manage various blockchain crypto assets at their own risk, and use Slash Payment for everyday payments.” – Slash Vision Labs Project Book.
In the near future, Slash intends to pioneer the first regulated crypto credit card in Japan, which will open up more convenient spending alternatives for Japanese residents who own crypto and would prefer to spend their funds directly instead of first converting them into fiat.
Summing it Up
The current consumer market is largely driven by convenience: receiving a delivery from Amazon within minutes, virtual window shopping, or seamlessly making a payment. The latter is particularly sensitive, as highlighted in this article, given the hidden costs often attributed to credit card payments.
Well, that doesn’t have to be the case anymore! Decentralized payment solutions will not only bring down global trade barriers but significantly reduce the cost of transactions. Already, a good number of businesses across the world are moving towards crypto solutions such as USDT or USDC stablecoins, whose transactions are much lower than what traditional service providers charge.
It’s no longer a question of if but rather a matter of when crypto assets will be embraced in the global payments ecosystem.