The diversification of the pool makes me think that in the coming years we will see some FinTech come in and bridge between the various parts and cut the ~3% fee down to a lower overall amount to try to gain a larger market share. Especially in businesses with narrow margins, reducing that fee can make a huge difference, so I think the market would be there even if some drawbacks. Not sure how technically/legally difficult it would be though?
If there's already very little margin left in interchange for fintechs, what's to stop further compression in pursuit of customer acquisition for higher margin products? End state... is interchange going to zero?
Maybe on the acquiring side, but on the issuing side in the US, definitely not. Most interchange flows to the issuing bank. Issuing banks fund lucrative reward programs with those fees. American consumers love credit card points.
I think we're more likely to see a new payment method disrupt credit cards than to have interchange fees go to zero.