The percentage cost for card processing (US credit/debit cards in mind here) is set up in a way that would make sense if each individual transaction had a significant marginal cost. Is that the right way to think about the supply side cost of card processing? I don’t think it is, so to me it feels like low-cost-transaction merchants are being way overcharged compared to high-cost-transaction merchants. What am I missing? My mental model of the cost of card processing is a big upfront cost for the initial network and for new features, but very very low marginal cost for each transaction (even including the servers etc required to keep it running).
For example, 2.9%+$0.30 per transaction is 3.2% for a single $100 transaction, 5.9% for 10 $10 transactions and 32.9% for 100 $1 transactions.
Ok, thank you for the answer. Huge fan of your work and looking forward to seeing what you get up to next