Is it worth it to accept non-Visa/MasterCard credit cards?
Visa and MasterCard are the two largest companies in the credit card processing industry, and it’s not even close. In 2013, Visa and MasterCard accounted for over 87% of all card transactions worldwide. The third-most common transaction type by card brand was China UnionPay with 7.7% of the global market, while American Express came in fourth place with 3.8% of the market. So it’s worth asking: why even bother accepting other card brands?
It costs nothing extra to add Discover card acceptance.
Before 2004, Discover and American Express struggled to make major gains among consumers due to exclusionary policies by Visa and MasterCard stating that any banks who were already issuing Visa/MasterCard cards could not also issue Discover or American Express cards. Understandably, most merchants only bothered to accept Visa and MasterCard, choosing to ignore the other, less popular card brands.
However, a federal court ruled in 2004 that this practice by Visa and MasterCard constituted an antitrust violation. This ruling enabled issuing banks to finally provide Discover and American Express cards to members in addition to Visa and MasterCard. The number of Discover cardholders grew in leaps and bounds in the ensuing years, and as a result, over 90% of businesses today that accept Visa and MasterCard also accept Discover Card. Since Discover cards can be processed using the same POS equipment as Visa and MasterCard, it should cost nothing extra to accept Discover brand cards alongside the major players.
If your business is one of the few that still does not accept Discover, you can likely begin to do so for no additional cost by simply getting in touch with your merchant account provider. Although you’ll pay interchange fees through Discover (which are similar to the fees charged by Visa and MasterCard), the increase in sales will outweigh these costs by a significant margin. Plus, you’ll offer your Discover card-carrying customers the added convenience of cash-free payments. But there’s also another perk of accepting Discover cards.
Discover Card acceptance includes JCB, UnionPay, and Diner’s Club acceptance.
Besides American Express (which we will address later in this article), the three biggest alternative card brands in the world are China UnionPay (often branded as simply “UnionPay”), Japan Credit Bureau (JCB), and Diner’s Club. These card types combined for approximately 8.9% of worldwide card transactions in 2013, with UnionPay making a relatively explosive gain of 1.66% over its 2012 market share.
If you’re a U.S. merchant, accepting these card brands might not seem worth the hassle, but there’s good news: Discover has processing agreements with all of them. This means that by accepting Discover cards, your business will also be able to process UnionPay, JCB, and Diner’s Club cards for no additional cost besides basic interchange fees.
What about American Express?
American Express is a unique case in terms of how it markets and prices its merchant services. Unlike Visa and MasterCard, which utilize an army of third-party resellers to market their services, American Express operates its own processing network and uses a large internal sales team to provide its merchant services directly to business owners. As a result, if you want to accept American Express cards, you’ll need to set up a separate merchant account through American Express.
This system has its advantages and its drawbacks. On the one hand, direct account management means that you won’t be dealing with third-party markups or shoddy customer service. Despite its massive size, American Express has an impressively low number of complaints online and is known for providing stellar customer service both to merchants and to consumers.
On the other hand, it can be a pain to manage a separate account just for American Express payments. To help with this, the company introduced a program called OnePoint in 2007 that allows its partner providers to group a merchant’s MasterCard, Visa, and American Express statements into one monthly bill, but some merchants might still feel that it’s not worth the hassle. In addition, American Express is known to have more expensive transaction fees than Visa and MasterCard (although the company does offer month-to-month agreements with no early termination penalties).
In the case of American Express, you should let your customers be the determining factor. American Express is known for offering quality rewards programs to its consumer cardholders, which in turn makes them eager to use their American Express cards at participating locations. If you anticipate a boost in sales from the ability to accept American Express, then it is likely worth the annoyance of setting up a separate account and paying slightly higher fees. If it doesn’t make sense for your business right now, though, then you should be fine as long as you accept Visa, MasterCard, and Discover.
Have you thought about accepting any other card brands? Let us know in the comment section below: