Why do payment providers (e.g., Square, Stripe) charge a similar processing fee? How did they arrive at ~3% + x cents

Question

Why do payment providers (e.g., Square, Stripe) charge a similar processing fee? How did they arrive at ~3% + x cents

In: Economics

Answer 1

Services like payment processing are commodity-like services, so all companies need to charge about the same to drive business yet make enough to stay profitable. They all have similar costs such as payments to the card networks (Visa, MasterCard, etc) and presumably similar other costs, desire to remain competitive. If others charged 3% and they charged 5%, nobody would pick them. If they charged 2%, then they’d lose money and go out of business.