# Paying to pay

*Who really benefits from the "convenience" of digital payments? Small businesses, payment companies or consumers? *

By [Musings](https://paragraph.com/@kunalp) · 2024-07-09

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It all started with a note at my local cafe. Working on [Keychain](https://www.keychain.money/) since 2022 had already piqued my interest in how we pay for things, but this simple sign opened my eyes to a startling reality:

![](https://storage.googleapis.com/papyrus_images/f51df5ad4fc9c3954e9824b3dc63832d.png)

This sign made me think hard about how money moves in our world. Every time I swiped my card, tapped my phone, or clicked "pay now," I realized I was part of a story of silent costs and hidden players.

I thought about cash. It's simple. A $50 bill stays $50 no matter how many times it changes hands. It goes from me to a restaurant, then to a laundromat, then to a barber, always worth $50.

But I realized card payments are different. When I pay a $50 restaurant bill with my card, $1.50 instantly goes to processing fees. The restaurant only gets $48.50. This keeps happening with every digital transaction. After 76 moves, that $50 becomes just $5. The rest goes to payment companies.

These fees are everywhere. In New Jersey, a purchase can cost an extra 10% - 6.5% to the state and 3% to fintech companies for "convenience."

This 3% isn't just pocket change. It's a silent drain on our finances. I could save this money by using cash instead. But I remembered how, after COVID-19 hit, I started using digital payments more often. I'm not alone - the [Federal Reserve reports](https://www.frbservices.org/news/fed360/issues/061523/cash-2023-diary-consumer-payment-choice#:~:text=The%20key%20Diary%20findings%20are,a%20decrease%20in%20cash%20payments.) 80% of US transactions are now digital. To process them, each one costs at least 3%.

![The Federal Reserve 2023 report: Findings from the Diary of Consumer Payment Choice](https://storage.googleapis.com/papyrus_images/d920c91b9c56de44df612a06cc10fbba.png "null")

This helped two main groups:

1.  Governments, gaining unprecedented financial oversight.
    
2.  Payment giants, promoting "convenient" payment methods like tap-to-pay to make billions.
    

While I support paying taxes, I can't endorse giving 3% of every transaction to billion-dollar fintech companies. This practice enriches the already wealthy while small businesses fight to survive.

![The anatomy of a payment](https://storage.googleapis.com/papyrus_images/99f79c4be82ef432e0f827202833b76a.png "null")

I used to ignore the 18 cents fee on my $6 coffee. But it adds up:

*   For coffee drinkers, it's $65.70 a year - the cost of 11 free coffees.
    
*   For cafe owners, it means selling 5 extra coffees daily just to cover the fees.
    

This silent drain isn't just costly. It's killing local businesses. Our payment system has become a complex, expensive maze that serves the few at the expense of the many. It's time we question who really benefits from this "convenience."

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*Originally published on [Musings](https://paragraph.com/@kunalp/paying-to-pay)*