Why are merchants hesitating to accept Amex credit cards?*
TY for the A2A.
I can think of at least three reasons why there might be question mark over acceptance of AmEx credit cards by Merchants:
- AmEx issues Merchant Accounts only to premium Merchants. If a Merchant is not premium, he won’t get an AmEx Merchant Account. In this case, the Merchant can’t accept an AmEx credit card even if he wants to.
- AmEx merchant fee (MDR) is higher than that of Visa / MasterCard / RuPay. In other words, a Merchant incurs a higher cost of accepting payments with an AmEx credit card than with a V / MC / RP credit card. If a Merchant is reasonably sure that customers in his target market will have V / MC / RP credit cards and that he won’t lose business by declining AmEx credit card, he can take a conscious decision not to apply for an AmEx Merchant Account. In this case, the Merchant can’t / won’t accept an AmEx credit card.
- Even if a Merchant has signed up for an AmEx Merchant Account and can accept AmEx credit card, he saves money if a customer pays with a V / MC / RP credit card instead of an AmEx credit card (because, as noted in #2 above, MDR for AmEx is higher than that for V / MC / RP). In this case, a Merchant will hesitate to accept an AmEx credit card in the hope that the customer will still make the purchase and pay for it with V / MC / RP credit card.
But that’s only a cost-conscious Merchant.
If a Merchant is a good businessman, he’d be more interested in increasing revenue than reducing cost. He’d be aware that an average AmEx credit cardholder spends more money as compared to an average V / MC / RP credit cardholder. Such a merchant will go out of his way to seek AmEx credit card holders and accept AmEx credit card even if they have V / MC / RP credit card.
In some markets, there’s a predominance of cost-conscious Merchants. In some others, there’s a predominance of revenue-conscious Merchants. Accordingly, extent of acceptance of AmEx credit cards is likely to vary from one market to another.