120 Days of Retail: Day 58 - Credit Card Companies are a Monopoly. How Ordering Online Can Help Fix It

There are only two major credit card companies in the United States. You already know them. Visa and MasterCard.

It may be the reason that there are only two major card networks in the US is that there's a chicken-and-egg problem where if there are no users, stores won't accept the card, and if there are no stores that accept it users won't want it either.

But the fact is the duopoly of Visa and MasterCard charge an arm and a leg to the businesses that accept those cards. These two companies together control 80% of the market in the US, and the lack of competition has caused their fees to climb- over 20% just in the last year alone, according to the National Retail Federation.

Credit card fees to businesses can range from about 1.5% to about 3.5% depending on the scenario and purchase. And those fees aren't any better with online processors. Stripe and Shopify both charge about 3% PLUS an additional and arbitrary 30 cent fee on top.

For large purchases, like a piece of furniture or a car, this could mean hundreds of dollars lost for a business. For a very small purchase, such as a soda or candy bar, that could be a third of the price of the item, cutting way into small businesses' already-small margins.

One way to get around the chicken-and-egg problem of making a new payment processor is to move the entire payment system online into an app, similar to Apple Pay.

This way, the online payments processor can negotiate lower fees due to having high transaction volume, and the store doesn't need to pay to install extra equipment.

For the above two reasons, apps like ListIt will make the credit card landscape more competitive by charging lower fees on top of the cost of the technology to process payments, in order to attract more users.

Shopify, Stripe, Visa and MasterCard all make their money on the transaction itself, which is why they have little incentive to lower their prices.

Moving forward in the space means building a platform that doesn't add a large amount of money off the back of each transaction in order to spruce up profits. And online payment processors through apps and QR codes are in a unique place to do so.

ListIt is the Buy Online Pickup In-Store solution for local retailers. It’s free and takes only seconds to upload your first product. You can reach out to me directly at james@listit.one