Why do payment providers (e.g., Square, Stripe) charge a similar processing fee? How did they arrive at ~3% + x cents
In: Economics
There are a few perspective to look at.
From a security perspective, allowing cashiers to handling cash is risky, they might steal, change the wrong amount etc.
From sales perspective, if consumers are have access to credit, they are more likely to spend and spend more and this generates revenue for the business
However why can’t business give their own credit to customers instead of relying on banks/providers? This is because it is hard to gauge every customer’s purchasing power,the business can easily give a credit limit that is too high and the customer is unable to pay back. Hence businesses rely on banks as assurance.
So now back to your question, how is the % arrived. I believe this is a number that is extensively research to fulfill a few criteria.
Maximum profit
Cannot be higher than most businesses profit margin
Cannot be lower than maintenance fee or upkeep
Ultimately, the provider will only earn more if the businesses grow bigger, so its a mutual relationship.
Pardon me if I’m not detailed enough, just giving my 3cents.
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