Fees, Friction, and the Future of Spend

This week’s Today in Payments covers merchants ramping up their use of digital wallets, growing backlash over surcharging, new momentum behind the Credit Card Competition Act, and cautious but steady consumer spending trends revealed in Fiserv’s latest Small Business Index.

Welcome to Today in Payments, I’m your host, Patti Murphy, here with your weekly dose of payments notes.

Merchants Eye Digital Wallets for Their Own Use

PYMNTS.com reports that a survey of merchants found 82% plan to increase their use of digital wallets. Consumer expectations for frictionless payments are pushing businesses to mirror those habits in B2B transactions. The reward: reduced administrative costs and real-time spending insights, PYMNTS explained.

A study by PYMNTS documents how checks—still the dominant payment method—can be a serious drain on merchant cash flow, potentially tipping the balance between survival and insolvency. The small businesses surveyed endure average payment delays of 9.1 days, and a total wait time of nearly 29 days (28.7).

The challenge, PYMNTS explained, lies in adoption: digital wallets must integrate with enterprise resource planning (ERP) systems.

Merchants Amp Up Rhetoric Over Processing Fees

Merchants are ramping up their complaints over card processing costs—what they call “swipe fees.”

A new study from payments consulting firm CMSPI shows that fees collected for processing credit and debit cards totaled $236.4 billion in 2024, up from $222.3 billion in 2023. The study revealed that the average rate for Visa and Mastercard credit cards was 2.91%. CMSPI’s calculations include interchange, network fees, and processing fees.

The Merchants Payments Coalition—which represents a wide range of businesses united in opposition to the Visa-Mastercard duopoly—is pinning its hopes on the Credit Card Competition Act (CCCA). This legislation, authored by Senator Dick Durbin (D-IL), would require the largest issuers of Visa and Mastercard credit cards (those with at least $100 billion in assets) to program their cards for processing over at least two unaffiliated networks. In other words: Visa or Mastercard, plus a competitor like NYCE, Star, or Shazam.

If past is prologue, Senator Durbin may attempt to attach the bill as an amendment to must-pass legislation. That’s how the original Durbin Amendment—capping debit interchange—made it through Congress, as part of the Dodd-Frank Act following the 2008 financial crisis.

Consumers Balk Over Surcharging

Surcharging is becoming more common—and consumers feel nickel-and-dimed. That’s the takeaway from a series of surveys: two by J.D. Power and one by WalletHub.

A late-2024 J.D. Power survey of over 3,800 small businesses found that 34% assess surcharges on credit card payments. Surcharging is allowed in 47 states, though many require that merchants clearly notify customers before completing a purchase. In states like California, businesses must factor all fees, including surcharges, into listed prices.

A separate J.D. Power survey of credit cardholders, published in August, found that 65% of respondents reported paying higher prices when using a credit card. (The survey didn’t clarify whether this was due to surcharging or cash discounting—the distinction may be lost on consumers.) The result? Customer satisfaction scores for card issuers dropped among consumers who encountered surcharges. Of those, 81% said they switched to a different payment method—suggesting at least some of these charges were actually cash discounts.

Meanwhile, a WalletHub survey found that consumers who experienced surcharges blamed merchants, not card issuers. Over 82% said they had paid a fee for using credit cards, and 87% said they felt “nickel-and-dimed.” More than three out of five respondents said it was unfair for merchants to pass card processing fees to customers—suggesting the merchant campaign against “swipe fees” isn’t resonating as they had hoped.

Consumer Spending: Resilient but Cautious

Leading acquirer Fiserv publishes a monthly Small Business Index detailing trends in consumer spending.

The August report showed month-over-month sales were relatively flat, with a few bright spots. Quick service restaurants (QSRs) led the way, showing 8.3% year-over-year growth, as consumers leaned toward wallet-friendly dining options. Across all restaurant types, year-over-year growth was just 2.2%, while month-over-month growth came in at 2.1%.

Retail sales grew across most subsectors compared to July, except in health and personal care. Overall, the retail sector saw a modest 1.1% increase.

Wholesale trade saw fewer transactions but higher average tickets. While month-over-month sales declined by 0.3%, the average ticket size rose by 2.3%. Year-over-year wholesale growth hit 3.1%, driven by a 5.8% increase in average ticket size—possibly reflecting tariff-related price pressure.

Fiserv also reported a 1.2% increase in discretionary spending, led by QSRs and budget-conscious entertainment.

Month-over-month, spending shifted slightly toward goods (+0.6%) while services slipped (-0.5%). Goods growth was led by gasoline, groceries, and clothing. Services growth—despite the monthly dip—outpaced goods on a year-over-year basis, with services up 4.8% compared to 2.0% for goods.

That’s all for Today in Payments. Stay tuned for your weekly dose of payments notes.