Merchant payment processing fees have long been a key factor influencing which payment cards retailers choose to accept. While premium card programs can attract higher-spending consumers, elevated acceptance costs have historically created friction for merchants, particularly small businesses with tighter operating margins. As competition among payment networks intensifies, card issuers continue to refine their pricing strategies to balance merchant acceptance with cardholder value, recognizing that widespread acceptance is essential to sustaining long-term growth.
American Express’ decision to reduce merchant payment processing fees reflects this ongoing shift in network strategy. By lowering acceptance costs, the company aims to close the acceptance gap with competing card brands while making its network more attractive to merchants that previously viewed Amex as too expensive. The move also highlights the increasingly competitive payments landscape, where pricing, acceptance, and merchant relationships are becoming just as important as rewards programs in driving card usage and transaction volume.
Looking to expand its retail network, American Express recently mentioned it will more aggressively lower merchant payment transaction fees in 2018. As the following article reports, the move expects to curry favor especially with small businesses that are more cost sensitive and less able to negotiate lower fees based on volume.
American Express is lowering the fees it charges to retailers and merchants to process card payments, the company recently said in an investor presentation. The new cuts will make the merchant fees the lowest they have been in nearly 20 years and are part of a recent push to make Amex cards more widely accepted by various locations.
Amex told investors at a presentation in New York that it’s planning to cut its merchant fees by about 2.37% globally, the fee’s sharpest decline since 1998, The Financial Times reports.
According to FT‘s calculations, the reduction in fees will amount to roughly a $585 million loss in profits for the company. Amex CEO Stephen Squeri, who took the helm of the credit card company in February, told investors he is willing to make “conscious tradeoffs” in order to make Amex cards more widely accepted. Because of its higher merchant fees, Amex cards are accepted at about 1.3 million fewer US locations than rivals like Visa and MasterCard. That number includes the 1.5 million US locations Amex added last year that now accept its cards.
“Any reduction in the fees help — but American Express, and all the major networks, have a long way to go,” Doug Kantor, a lawyer who represents the Merchants Payments Coalition, told FT. Smaller retailers and locations might still be hesitant to accept Amex, he said.
Amex’s corporate partners, like Delta and Hilton, are also lobbying for better a better deal, John Hect, consumer financial analyst at investment bank Jefferies, told FT. He noted: “Retailers have become really aggressive at pushing back.”
While not known for its lower merchant payment fees, in recent years American Express has stepped up to be more competitive with its OptBlue program, specifically targeting small businesses across several global markets. Now, with a recent CEO change, American Express may be signaling that higher market share is not such a bad thing after all. Whether more merchants will now start to accept the card remains to be seen. Of course, other card networks are watching this with interest and won’t be standing still.
The evolution of merchant payment processing fees demonstrates how payment networks must continually balance profitability with broad merchant acceptance. Lower interchange and network fees can encourage more businesses to accept a payment brand, ultimately creating greater convenience for consumers and expanding transaction opportunities for issuers. At the same time, merchants continue to evaluate acceptance costs alongside customer demand when deciding which payment methods to support.
American Express’ pricing strategy illustrates the competitive pressures facing all major card networks as they seek to expand market share. Whether fee reductions alone are enough to persuade reluctant merchants remains uncertain, but the move reinforces the industry’s broader trend toward improving merchant economics while maintaining premium cardholder experiences. As competition continues, merchants can expect payment networks to pursue additional initiatives designed to strengthen acceptance and deepen relationships with businesses of all sizes.
Overview by Raymond Pucci, Associate Director, Research Services at Mercator Advisory Group
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