According to the recent 2018 Federal Reserve Payments Study, Americans used their credit and debit cards to purchase nearly $6.5 trillion worth of goods and services in 2017.1 The same study also reported that total card payments had a robust growth rate year over year, increasing 10.1 percent measured by transaction volume.2 E-commerce payments alone made up $517 billion in 2018, up 15 percent from the prior year.3

As the numbers make clear, credit and debit cards are an integral part of in-store, online and mobile commerce. In fact, the volume—and value—of card payments is high enough for larger merchants to maintain teams that focused solely on optimizing authorization approval rates, fraud mitigation and transaction costs. Regardless of size, every business should have a strategy for approving the most transactions at the lowest possible cost.

How to qualify for better interchange rates

Commercial cards can be organized into “Levels”, each defined by the type of information required to be submitted to complete the transaction. Level 1 has the minimal number of requirements to process a transaction and consequently the highest processing cost. Level 2 and 3 require the merchant to send in more detailed information about the purchase to have their transactions be classified at these levels—each level has specific requirements.  Merchants that can submit Level 2 and Level 3 data for eligible commercial card transactions can qualify for better interchange rates.

J.P. Morgan can help merchants identify the savings achievable by submitting each level and the requirements for each level to achieve savings

How to reduce credit card processing fees

Be vigilant regarding potential downgrades and compliance fees. Downgrades happen when a merchant does not achieve the best interchange rate for a transaction and is assessed a higher rate to process this transaction.  This usually occurs when a merchant is not compliant with all of the payment network brand rules.  Common breaches of compliance include not closing a transaction within a certain timeframe after authorizing the transaction, or failing to verify address details in an e-commerce environment.

Identifying common downgrade reasons is a capability J.P. Morgan is able to point out to the merchant so they can identify where they could be improving their rates and saving on fees.

Maximize all debit opportunities to reduce your cost of payment

Merchants can process debit cards in one of two ways:

  • over a credit network, called signature debit or
  • over a debit network, called debit processing

Typically, merchants can lower their cost of payment by processing all eligible transactions via debit networks due to the lower costs offered via debit processing.  This used to mean, from a user experience, a customer entering their PIN into a terminal at a physical location.  Yet, there are now many other options J.P. Morgan supports for debit processing, including PINless debit in online environments, to reduce the cost of payment.

J.P. Morgan can also help merchants optimize their debit processing through many debit routing options.  When a merchant processes their card to a debit network, there may be more than one eligible debit network to route the transaction for a card.  This means options, and the possibility to reduce the cost of processing even further.  J.P. Morgan Merchant services offers various debit routing solutions to optimize a transaction’s cost, and give merchants the level of control in routing decisions they desire.

Leverage international currency solutions to offset costs and streamline operations

Operating internationally may mean increased costs and currency complexities for a business.  J.P. Morgan can help make sense of these currency conversion issues by offering various foreign exchange solutions for settlement and reporting.  This may not directly reduce your cost of payment for each transaction, but could reduce the operational burden of managing various payment types and potentially increase revenue streams.

Talk to a processing expert

Because approval rates, transaction costs and fraud mitigation are interrelated, a thoughtful approach is required to minimize unintended consequences. For example, the benefits of marginally higher approval rates achieved by dropping address verification services may be offset by increased counterfeit card fraud and interchange fees. And for businesses with subscription models, failure to properly identify recurring transactions in authorization messages can reduce the first-attempt approval rate and make multiple retries uneconomical.

As both a card issuer and a payment processor, J.P. Morgan is uniquely positioned to help our clients optimize their payment management practices. In 2017, Chase cardholders used their credit and debit cards to spend more than $900 billion.4 And, as a top five acquirer of purchase transactions overall,5 J.P. Morgan helped merchants process $1.2 trillion in card payments from customers.6

Our relationship managers pride themselves on working proactively with clients to maximize processing cost savings on both credit and debit card transactions. Whether PIN or PINless billpay, e-commerce or POS solutions; interchange rate elevation; assistance with downgrade surcharge avoidance; or other processing-related issues, we can help clients find the best combination of solutions for their respective businesses.

To learn more about the optimization strategies discussed in this article and other ways we help merchants manage risk, cost and complexity, contact your J.P. Morgan  representative.



Federal Reserve Payments Study, 2018 Annual Supplement op. cit. p 2


Ali, Fareeha, “US ecommerce sales grow 15.0% in 2018,” Digital Commerce 360 Internet Retailer, February 28, 2019 (


2017 J.P. Morgan Chase Annual Report


The Nilson Report, Issue 1127, March 2018


2017 J.P. Morgan Chase & Co. Annual Report