What is the impact of the Capital One/Discover merger on small businesses?

Small business owners don’t like paying credit card processing fees. If you run a restaurant or brick-and-mortar retail business, losing more than 2.24% on every transaction can feel like a painful cost of running a business. The recently announced Capital One/Discover merger, along with other developments in the credit card industry, could lead to big changes in credit card payment fees.

But will the changes to swipe fees actually make a big difference to small businesses? We spoke with a credit card expert to find out.

Capital One/Discover Merger: No Much Relief for Small Businesses.

Capital One recently announced that it is acquiring Discover (and the Discover payment network) in a deal that could transform the credit card industry. Owning Discover’s payments network could potentially allow Capital One to compete with Visa and Mastercard and offer merchants and retailers (including small and medium-sized businesses) a better deal on swipe fees.

Eric Cohen, CEO and founder of Merchant Advocate, a company that helps businesses save on credit card processing fees and fees, said larger merchants are likely to benefit the most from the Capital One/Discover merger.

“Given the ongoing conversations and potential regulations, it is too early to know whether there will be a positive impact on small businesses,” said Eric Cohen. “But in the past, similar large-scale mergers have primarily served to benefit large corporations at the expense of everyday mom-and-pop stores.”

Capital One, for example, has said it wants to work more closely with merchants to drive more sales for them while also creating good deals for consumers. No one knows exactly what that will look like yet, but it could include better offers from merchants, a premium customer experience, and specialized customer loyalty programs. Of course, many of these functions require “big enterprise” size and scale that small businesses cannot afford.

And big changes from the Capital One/Discover merger may not happen anytime soon. This transaction requires federal approval from the FTC, which is not guaranteed. The U.S. government has recently taken action on several notable mergers, such as JetBlue’s attempted purchase of Spirit Airlines.

“If the deal passes and Capital One decides to push Discover as a third network without increasing interchange fees, merchants could feel some relief over the next few years, but it won’t be immediate,” said Eric Cohen of Merchant Advocate. said.

Visa and Mastercard’s $30 Billion Agreement: Small Businesses Won’t See Much Change

Another big development in the credit card industry was announced on March 26, 2024, when Visa and Mastercard agreed to reduce credit card payment fees for merchants. The deal made big headlines as the seller’s estimated cost savings are expected to be about $30 billion over five years.

But if you look closely at the details, it’s not that big of a deal for small business owners. Visa and Mastercard agreed to reduce swipe fees by about 4 basis points (0.04%) over three years. So, if your small business makes $100,000 worth of payments per year via Visa or Mastercard credit cards, you’ll save about $40.

What should small business owners do about swipe fees?

Your role as a small business owner may not allow you to save money on credit cards. But as a credit card customer, you can do more to enjoy the benefits of credit cards in your life. Get a small business rewards credit card. Spend more on your everyday (and monthly) business expenses with a credit card that actually offers valuable rewards.

Some of the best business credit cards pay up to 4% or 5% cash back on everyday business spending. You can also receive valuable travel rewards and welcome offers, including tens of thousands of bonus points. Rewards credit cards are a great way for small business owners to save on swipe fees. You can turn credit card transaction fees from a painful cost of doing business into extra “fun money” for your personal finances.

conclusion

Despite big headlines about the Capital One/Discover merger and Visa and Mastercard’s $30 billion swipe fee deal, small business owners aren’t likely to see any major changes or cost savings anytime soon. Credit card processing fees are a big part of everyday payment activities, and ideally, the convenience for your customers is worth the cost to your business. However, small business owners still have options to save even more on fees. Use the best rewards credit cards for your everyday spending as a business owner and in your personal life.

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