Payment Statistics VARs and MSPs Need to Know

Debit cards are the most used form of payment, contactless cards are being issued by the millions, and VARs and MSPs are leaving money on the table.

Payment statistics show that consumer behaviors are changing — and could continue to change — as Americans gain access to and adopt new technologies. Consider these facts and figures that indicate the direction the industry is heading and what they can mean to your business.

Debit cards are used more often than any other form of payment. The 2019 Diary of Consumer Payment Choice published by the Cash Product Office (CPO) of the Federal Reserve System states that in 2018, for the first time, cash was not the most common payment method in the US. Consumers used cash for 26 percent of transactions, down from about 30 percent in 2017. Debit cards rose to the top position, with consumers using them for 28 percent of transactions. Credit card use increased by 2 percent from 2017 to 2018 and accounted for 23 percent of transactions.

The CPO explains that although cash is no longer the most commonly used form of payment, it is still widely used, especially for payments totaling less than $10: it’s used for 42 percent of small value payments vs. for only 10 percent of payments over $25.
Key Takeaways for VARs and MSPs

Understanding how consumers are making payments should inform the payments solutions you recommend to your clients. With few exceptions, businesses need a payment solution that enables them to accept debit and credit cards. As a trusted advisor to your clients, however, you know that not every payment solution will give your clients all of the features, functionality, and security they need. Also, your clients who routinely process low-value transactions still need a secure and effective cash management solution.
Dig deep to understand your clients’ businesses and the types of payment transactions they process so you can implement a solution that meets their unique needs.
Card brands issue millions of contactless cards.

Only a fraction of payment transactions were contactless prior to 2019, but, with more Americans receiving contactless cards this year, the industry is poised to see that rate increase. Visa anticipated issuing 100 million contactless cards this year, and American Express and Mastercard are also issuing contactless cards. A.T. Kearney estimates that by 2022, 56 percent of payment cards in the US will be contactless.
Key Takeaways for VARs and MSPs

Merchants need specific technology to accept contactless payments. Near-field communication (NFC) enables contactless payment cards to communicate with card readers, and many merchants purchased payment solutions with NFC technology when they upgraded to EMV technology. However, contactless payment acceptance is not automatic. Mobile wallet adoption has been limited, in part, by merchant acceptance of contactless payments. There may, however, be a greater demand for contactless payments once consumers have used contactless cards.
Help your clients configure their payment systems so they can provide their customers with the convenience of tap-and-go payments.

The value of payment card transactions totals $6.48 trillion
The most current Federal Reserve Payments Study — 2018 Annual Supplement — states that card payments “continued to show robust growth from 2016 to 2017, collectively increasing 10.1 percent by number and 8.4 percent by value.” The report further states that the sum of credit card, non-prepaid debit cards, and prepaid debit card transactions totaled $6.48 trillion in 2017.

Key Takeaways for VARs and MSPs

You can’t deny the payment processing market size. Of course, the potential for VARs and MSPs isn’t the full $6.48 trillion — the vast majority goes toward payment for goods and services. But VARs and MSPs who provide payment processing solutions receive a percentage of transactions. For the purposes of illustration, suppose merchants pay an average effective rate of about 4 percent of transaction amounts for card processing, and about 30 percent of that payment goes to the VAR or MSP selling the solution. It seems like a small fraction, but 4 percent of $6,480,000,000,000 is $259,200,000,000. And 30 percent of that number is $77,760,000,000 or about $78 billion.
Are you getting your cut?