Cash Acceptance vs. Cashless Transaction Costs – Part 1

In Depth Look at Costs for Cash and also Cashless

Cash is not “free,” and cashless is not “simple.” The lowest-cost payment strategy depends on volume, risk profile, service design, and deployment scale — not headlines.

Overview

As self-service kiosks continue to replace staffed transactions across retail, QSR, government, healthcare, and unattended payment environments, one question consistently resurfaces:

Should kiosks accept cash, go fully cashless, or support both?

The answer is rarely ideological — it is economic.

This article examines the true cost structure behind cash acceptance versus cashless transactions in kiosk deployments. While cash is often assumed to be expensive due to handling, security, and servicing requirements, cashless transactions introduce their own layered cost model involving payment processors, card networks, interchange fees, and risk-based pricing structures that are frequently misunderstood or underestimated.

For kiosk operators, the decision is not simply about convenience or consumer preference. It is about:

• Transaction volume and average ticket size

• Fee predictability versus operational overhead

• Deployment scale and service logistics

• Regulatory and accessibility considerations

• Long-term margin impact, not just upfront savings

This first part focuses on how cashless payments actually clear, why transaction fees vary widely, and what drives processing costs higher or lower depending on card type, network, risk profile, and merchant configuration. It also reframes cash acceptance as an operational cost — not an automatic disadvantage — when properly deployed and serviced.

Part 2 will extend this analysis into real-world kiosk scenarios, comparing total cost of ownership (TCO), uptime risk, service models, and revenue impact across common self-service verticals.

For operators making long-term infrastructure decisions, understanding these mechanics is essential. Payment choice at the kiosk is no longer a binary decision — it is a strategic one.

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Cash Acceptance vs. Cashless Transaction Costs – Part 1

Integrating cash vs. cashless payment is a question every Operator must wrestle with anytime a kiosk application with payment is involved. In some cases, the answer is straightforward, and in other cases, it’s not.

In some applications, cashless payment is the “base” payment, where the question is whether cash payment should be enabled. In other applications, cash (in the form of notes or coins, or both) is the “base” payment, where the question then becomes whether cashless should be integrated or not.

There are benefits to both types of payment for an Operator, as well as inconveniences and costs. For kiosk operators, this means two identical-looking transactions can produce materially different margins

The Convenience of Cashless Payments

Cashless payment has gained traction over the years not simply because kiosk users have been increasingly willing to use their card, but also because it is convenient for the merchant as well. You simply install a relatively inexpensive piece of hardware (from a capital cost point of view), sign up with a bank, processor or gateway, and off you go. You really need not spend any effort to get your money into your bank account. Consumers pay with their card at the terminal, and the money shows up in the merchant’s bank account after some time.

Operational Considerations

Now compare the operational simplicity of accepting cashless payment with the complexity of accepting a cash payment. To accept cash, you’d have to have a cash till opened, with all the operational procedures around it (opening the till, closing it, replenishing change during the day etc.). You will have to pay for armored carrier pickups for cash revenue as well as pay a significant cost to source change. Alternatively, your cash or store manager can walk or drive to the bank to deposit the cash proceeds and source change (if no Cash In Transit service is used), but that comes with its time sink and safety risk to that manager.

With cash, you’re also exposed to shrink.

Cashless is so much simpler, but underlying this simplicity is a complex web of transaction processing costs, which is driven by the way the cashless transaction is cleared. So, let’s explore this first.

How a Cashless Transaction Is Cleared

What happens every time a consumer uses their credit card at the POS? How does payment (aka a credit) gets processed so quickly in such a magical way?

Clearing a card transaction involves many steps, starting with obtaining authorization from the card issuer and ending with settling the transaction. At a high level, though, clearing a card transaction involves the steps described in Figure 1 below.

FIG1

The following parties are involved in the card transaction:

• Issuing Bank: this is the bank (or financial entity) that issued the consumer the card that they’re presenting.
• Acquirer (or Merchant Bank): the bank where the merchant houses their business bank account
• Processor: the entity routing the transaction to the appropriate parties to clear (this will be described later below)
• Card network: the networks that own the “rails” over which the transaction clears. This is VISA, Mastercard, Discover etc.
• In addition, there can be a Payment Gateway (not shown in the graphic above), which sits between the merchant and the processor. Gateways provide other services to the merchant and accept cashless payment through other channels (e.g. online, mobile etc.).

When a consumer presents a card to a POS terminal, the following macro steps take place:

• The POS terminal contacts the merchant’s bank
• Merchant bank contacts the processor (or gateway if it’s in the middle)
• The processor routes the transaction onto the appropriate rail network
• The rail network contacts the card issuing bank for authorization and approval
• Upon approval, the transaction value is deposited into the merchant’s bank account, minus the transaction processing fees (to be described later below).

Of course, there are many more micro-steps above that take place during the transaction clearing process and afterwards for settlement (not to mention any potential future chargebacks). But the above is a good enough description for the purpose of understanding the cashless transaction processing fee.

In a nutshell, every participant in the chain of transaction clearing described above charges fees for the (electronic) role it partakes in the process.

Now, let’s dive into this fee structure.

The Structure of Cashless Transaction Processing Fees

Ask any Retailer what their cashless processing fees are, and you will get a different answer from different members of their staff, that is of course unless they’re presented with a flat interchange (more on that later), which in other words means that they’re overpaying.

The confusion stems from the complexity of the structure of transaction fees. The charges typically come in two flavors:

• Charges that are based on a percentage of the transaction value being cleared. In other words, the fee amount is variable, scaling up and down with the ticket price.
• Charges that are fixed, regardless of how large or small the transaction value is. This component does not scale up or down with the ticket price (with some exceptions).

So, the first charge type, which is modeled as a percentage of the transaction value, is painful for merchants that sell high ticket value items. Restaurants, apparel retailers, and grocers are all examples of merchants that pay high transaction fees because of the usually high average ticket price. On the other hand, the fixed fee components of the charge really impact merchants that have a low average ticket price. Coffee shops, convenience stores (for in-store purchases), ice cream parlors and dollar stores feel the pain on the fixed fee component(s). These businesses have to secure a lot of low value ticket transactions to remain viable, where the fixed part of the transaction fee could end up more expensive to them on a percentage basis (of the average ticket price) than the variable component of the fee.

So, what are those charges then? In general, the main categories of charges are outlined in Table 1 below.

TABLE1

There are numerous other fees here and other (authorization fees, NABU fee etc.), but the above represent the bulk of the actual charges the merchant pays to clear a card transaction.

You will notice that ranges were given for charges in the table above. The reason is that there are several factors affecting the charges. Prepare for your head to spin!

FACTORS AFFECTING CREDIT CARD FEES

Even though a bunch of transactions can clear the exact same way, and even though they might even be of the same ticket price, the transaction fees to the merchant can vary.

As previously mentioned, the same card swiped at different merchants will be different if at least due to the differences in the SIC codes of those merchants. But there are more reasons that fees differ. Factors affecting the transaction fees the merchant pays to accept a credit card transaction include:

• The card network
• The card “type” or “brand”
• Transaction risk to the card network
• The merchant’s ability to negotiate

Let’s explore each in a little more detail.

THE CARD NETWORK

The fees vary between card networks, who publish their fee schedule which outlines different fee values for different industries. The card networks charge different interchange fee for a restaurant vs. a grocer, etc., and the charges are laid out by SIC code.

Of all the credit card networks, AMEX is by far the most expensive for the merchant. That’s why the AMEX card is not accepted everywhere. This is also related to the second factor, which is the card type, because AMEX cards generally confer more benefits on the holder.

CARD “TYPE”

We have all been courted by someone (over the phone or in person) to sign up for a premium rewards card. Maybe you get more points for airline loyalty plans. Maybe you get more cash back. Either way, the more the benefit to the consumer for using that card, the more “premium” that card is, and the higher the transaction fee to the merchant at which that card is used. After all, someone must pay for those premium card benefits, and apparently, especially if the card has no annual fee, if it is not the consumer who’s paying, then the merchant is! Every time you use that branded card, the merchant’s fees increase, and the merchant turns around and increases the price of its goods or services to compensate for that.

TRANSACTION RISK

This is a big one and is related to the issuer’s exposure to fraud because of clearing the transaction. It is usually the issuer and not the merchant that bear the risk of fraud (let’s not get into the EMV transition please!).

Fees, therefore, will be lower for Card Present transactions vs. Card Not Present (card details keyed in). That is because in the latter, someone could have noted down your card details and started to use it without your knowledge and approval.

In addition, PIN-enabled transactions are more secure than swipe transactions. That is because the magstripe content can be widely counterfeited, but only the cardholder knows their own PIN (unless someone found out what the PIN is of course). Now, contactless/tap is the odd one out because it is a combination of difficult to counterfeit chip technology combined with no verification the holder is the true owner of the card (tap does not ask for a PIN, except in specific circumstances). However, the card networks have been more lenient with this one because the tap functionality was aimed at taking share away from cash transactions (i.e. by matching the ease of use of the card with the ease of use of cash: take out the wallet, take out each instrument, and “make a move” with either instrument).

MERCHANT’S ABILITY TO NEGOTIATE

As with all deals in the business world, large players can negotiate a better deal. If you bring a huge amount of volume to a card network by accepting their cards, you can rest assured there will be some wiggle room in the fees charged to you, which shall remain strictly confidential. However, if you’re a small business, you can forget about getting any sort of meaningful discount. Chance are that you’ll end up paying the list price, while of course not dealing directly with any of the major players in this space.

But there’s an additional level of complexity that all business tiers, from large to small, will have to digest and make a decision, and that’s related to the way the credit card fee pricing is presented to them.

Transaction Fee Pricing Structure to the Merchant

Above, we outlined the various transaction fees and the different factors impacting their value. But merchants are not necessarily presented with this “raw” fee structure. There are three types of transaction fee offerings by the players in the value chain:

• Interchange plus
• Tiered pricing
• Flat pricing

Each of these pricing approaches presents advantages and disadvantages for the merchant.

INTERCHANGE PLUS

This is the most transparent pricing of all. The provider (the entity selling card acceptance services to the merchant) is essentially vowing to simply pass their costs to the merchant and add on top of that a fee for their services. While this is the most transparent offering, and most probably the cheapest offering to the merchant, this pricing structure is the most difficult for the merchant to understand and forecast a cost basis upon. That’s simply because the merchant cannot predict what cards their customers will present and what verification method they will use.

TIERED PRICING

In this pricing type, the merchant is typically presented with 3 interchange tiers: qualified, mid-qualified and non-qualified rates (as well as debit). The different categories pertain to the different security risk associated with the transaction, for which each tier has its own flat pricing.

Consider this an approach somewhat in between Interchange Plus and Flat Pricing. However, this will definitely not end up being the cheapest option for the merchant, as risk premiums would inherently be built into the rate for each tier, if at least for the purpose of hedging against the use of premium branded cards. This option is also not very useful for the merchant for forecasting, as they have no way of determining how many of their customers will swipe vs tap vs insert and provide a PIN.

FLAT PRICING

Don’t let the word “flat” deceive you. This pricing structure is not about a fixed fee (in cents) per transaction. It is rather one single percentage of the transaction ticket price. In other words, this option, for example, indicates that the merchant will pay, say, 2.5% of the ticket price, regardless of the card type, the network brand, or any other factor impacting the underlying cost structure. By far, this is the easiest to understand fee structure for the merchant. However, chances are that this is the most expensive option for the merchant.

Consider this: the party selling you this plan is assuming the risk of all the factors that will impact the actual cost of every single transaction. Guess what, they’re going to bake in a nice risk premium into the offering, and that risk premium is reflect in the flat fee that would have been higher than the actual aggregate fee that would have been incurred by “raw” pricing.

And if all the above’s not enough yet to get you dizzy, you should know that credit card fees have changed over time. You should also know that are differences in Europe vs. the US.

Understanding how fees are calculated is only the first step. The real question for kiosk operators is how these costs compare against cash handling, service, uptime, and customer access — which we address in Part 2.

Recommended Experts

• Reforming Retail and Jordan Thaeler

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More Context

• Ultimately, I believe small businesses should offer both cash and credit card options without incentivizing cash use by offering lower prices. This practice can confuse customers and is not necessarily justified, as businesses still incur hidden costs when handling and processing cash. Since some consumers may not have credit cards, while others may prefer not to use cash, allowing customers to choose their preferred payment method can boost both revenue and satisfaction. This flexibility enables small businesses to grow more effectively than if they required only one payment method. While cash usage may decline in the coming years and credit cards may become more ubiquitous, that shift hasn’t fully happened yet. For now, letting customers pay in the way that’s most comfortable for them is the best strategy for maximizing profitability.  https://consumerbankers.com/blog/credit-card-interchange-the-cost-of-accepting-cash/
• More merchants are offering a lower price to customers who use cash rather than credit card for a purchase. That means opting for paper over plastic may save you money in some cases. Just how much? Typically, cash discounts run about 2% to 4% on purchases, though savings can be higher, experts said. CNBC
• https://www.kansascityfed.org/research/economic-review/cash-or-debit-cards-payment-acceptance-costs-for-merchants/ Fumiko Hayashi examines which of two payment methods—cash or debit cards—is more costly for merchants to accept in person in six countries: the United States, Australia, Canada, the Netherlands, Norway, and Sweden. She finds that debit cards have been more costly for merchants to accept than cash in the United States in recent years, while cash has become more costly to accept than debit cards in the other five countries. Two factors explain this difference. First, although interchange fees are just one component of merchants’ debit card acceptance costs, the fees alone are higher than the total cost of accepting cash in the United States. Second, the number of cash transactions has declined at a much slower pace in the United States than in other countries, keeping the cost of accepting cash from rising.

Card Present – Swipe Versus Insert Versus NFC

As a working 2025 ballpark: roughly 1 in 2 in‑person card payments is a tap, a bit under 1 in 2 is a chip insert, and only a small single‑digit percent is still an old‑fashioned swipe.

Payment Fiats

Most in-person and online “credit card style” payments in 2025 are still dominated by Visa/Mastercard, with crypto and stablecoins growing fast in volume but still tiny in everyday point‑of‑sale use.​

Network shares (Visa/MC/others)

For consumer card networks (credit and debit combined), recent global and U.S. figures for purchase volume look roughly like this:

• Globally, Visa processes about 39% of all general‑purpose network card purchase transactions, with Mastercard, UnionPay, American Express, and Discover making up the rest.​

• In the U.S. specifically, purchase volume by network in 2023–2024 is roughly:

  • Visa: about 40–45% of purchase volume

  • Mastercard: about 20–25%

  • American Express: about 10%

  • Discover: low single digits
    Exact percentages differ slightly by source, but they all show Visa and Mastercard as a clear duopoly with Amex and Discover much smaller.​

A simple way to think of it: out of 100 “card network” transactions worldwide, roughly 40 go over Visa, 20–25 over Mastercard, 30 over UnionPay (heavily China‑centric), and only a single‑digit remainder over Amex, Discover, and domestic schemes.​

Card vs crypto/stablecoin volumes

When you compare card networks to crypto and stablecoins, you have to separate on‑chain transfer volume from actual merchant payment usage:

• Visa processed about 15–16 trillion dollars of payment volume in 2024, with Mastercard near 10 trillion.​

• Stablecoin transfer volume on public blockchains reached about 18–32 trillion dollars in 2024, depending on the methodology; several analyses note this now exceeds the on‑network volume of Visa or Mastercard individually, and sometimes even both combined.​

• However, only a fraction of that stablecoin volume is actual consumer or merchant payments; one industry estimate puts payment‑specific stablecoin flows at around 5–6 trillion dollars, much of it B2B or cross‑border.​

By contrast, direct crypto spend at merchants (e.g., paying a retailer in bitcoin or USDT) is still very small compared with card use:

• One large crypto payments processor reported handling about 1.7 million crypto payments in 2024, a 30% increase, with stablecoins growing from about 16% of its transactions in 2022 to over one‑third in 2024.​

• A broader infrastructure study suggests that consumer/card‑like payments are under 20% of all stablecoin payment volume, implying a low‑tens‑of‑billions‑per‑year run‑rate for “pay with crypto at checkout” compared with many trillions via cards.​

Trend directions into 2025

Putting it all together, the main trends by type are:

• Visa/Mastercard:

  • Still grow total volume every year, but share is gradually pressured at the margin by account‑to‑account, wallet, and alternative rails.​

  • Duopoly position remains very strong: they still process the majority of consumer card payments worldwide.​

• Other card networks (UnionPay, Amex, Discover, domestic schemes):

  • UnionPay has huge volume but is geographically concentrated in China and nearby markets.​

  • Amex and Discover hold single‑digit global share and fairly stable niches in higher‑spend segments (Amex) and U.S. mass market (Discover).​

• Bitcoin and non‑stablecoin crypto:

  • Merchant usage is expanding from a tiny base, with some countries and retailers embracing Lightning or similar solutions, but it remains a very small share of total retail payments.​

  • Volume trends are up and to the right, but volatility, tax treatment, and UX still limit everyday use for most consumers.​

• Stablecoins (USDT, USDC, etc.):

  • Fastest relative growth: multiple reports show stablecoin transaction volume exploding from low billions in 2018 to tens of trillions by 2024, with monthly volumes in 2025 approaching half or more of Visa’s processed volume.​

  • Usage is shifting from pure trading/DeFi to payments infrastructure: cross‑border B2B, treasury, and some merchant settlement, though consumer tap‑to‑pay in stablecoin is still early.​

Rough “payment‑type” picture

As of 2025, for everyday retail and card‑like payments (in‑store and online with consumers), a rough conceptual split is:

• Traditional card networks (Visa, Mastercard, UnionPay, Amex, Discover, domestic cards): the overwhelming majority of transactions and dollar volume.​

• Bank A2A, wallets, and account‑to‑account rails (Zelle, RTP, Pix, UPI, etc.): quickly growing but typically ride outside the “card vs crypto” framing.​

• Bitcoin and stablecoins used directly at merchants: rapidly growing but still in the low single‑digit percentage of global retail payments, with stablecoins already much larger than BTC for commerce use

• What about Zelle?  Within U.S. P2P, Zelle is now at or near the top by dollar volume, exceeding Venmo and PayPal’s U.S. P2P volumes; Venmo did under 300 billion in 2024 versus Zelle’s 1 trillion.​ Versus Visa and Mastercard in the U.S., Zelle is still much smaller because card networks cover all retail, e‑commerce, T&E, and B2B card spend, not just P2P and small‑business bank‑to‑bank flows. But yes, in 2025 Zelle has been in the news repeatedly over fraud, scams, and related legal and regulatory actions

Most of what was just described (Visa, Mastercard, Amex, Discover, UnionPay, bank transfers, etc.) is fiat-denominated payments, even if some of it briefly rides on crypto rails for settlement.​

What “fiat” means here

• Fiat money is government‑issued currency like the U.S. dollar, euro, or yen whose value comes from law, policy, and market trust, not from being redeemable for gold or another commodity.​

• A payment is “fiat” if the value is ultimately in one of these national currencies, regardless of the technical rails used to move it.​

So a typical Visa or Mastercard purchase in dollars or euros is a fiat payment; the networks settle obligations between banks in fiat, even if they now have options to settle portions in stablecoins like USDC.​

Where stablecoins and bitcoin fit

• Fiat‑backed stablecoins (USDC, USDT, etc.) are cryptocurrencies whose price is pegged 1:1 to a fiat currency and backed by fiat‑denominated reserves, so they are crypto tokens but economically track fiat.​

• Bitcoin and non‑pegged crypto are not fiat; their value floats independently of any government currency.​

In practice today:

• Card networks and most merchants are still pricing and settling in fiat; stablecoins are mostly used as a bridge or settlement asset that gets converted back to fiat for the merchant or bank at the edge.​

• A “pure” non‑fiat payment would be something like paying and settling entirely in BTC, without conversion to dollars or another national currency at either end.