Card Forum: National Merchants Revisited

Charles Marc Abbey of First Annapolis reports on the economic implications for merchant bankcard acquirers supporting national merchants.

For the early 1990s, First Annapolis estimates that national merchant net spread (gross revenue less interchange and assessments divided by sales volume) averaged about 30 basis points (0.3%), which dropped to 17 basis points by mid-decade and then dropped again to 13 basis points by early this decade. (There is no good industry data, but our educated guess is that the price competition in the national market˜the decline in net spreads˜is twice the rate of the rest of the industry.) This 13-basis-point net spread compares to an average for the rest of the industry in the 55- to 65-basis-point range. So though national merchants generate over half the volume in the industry, they account for less than 20% of revenue.