Many Indian shops still decline to accept American Express (Amex) cards, despite the increasing prevalence of credit card usage in the country. This reluctance stems from a combination of historical, regulatory, infrastructural, and economic factors that have shaped Amex's presence in the Indian market. While Amex is gaining ground, particularly among high-income urban professionals, its acceptance lags behind Visa and Mastercard.
One of the primary reasons for the limited acceptance is the higher Merchant Discount Rate (MDR) that Amex charges to merchants. MDR is the fee that merchants pay to card companies for processing transactions. Amex typically charges a higher MDR compared to Visa and Mastercard, often cited as being between 2.5% and 3.5% per transaction, while other networks charge between 1.5% and 2.5%. For businesses operating on thin margins, especially Micro, Small, and Medium Enterprises (MSMEs), this difference in fees can be a significant deterrent. Some merchants may prefer to avoid accepting Amex cards altogether to minimize these costs.
Another factor contributing to the issue is the history of regulatory challenges faced by American Express in India. For many years, Amex operations were restricted in India, and a ban was only lifted in August 2022. This ban limited Amex's ability to expand its network and establish relationships with merchants. Although the lifting of the ban has opened doors for growth, acceptance rates still vary considerably depending on the location and the size of the merchant.
Furthermore, the technological infrastructure in India presents some hurdles. American Express uses proprietary technology that requires compatible merchant terminals and network integration. While the Unified Payments Interface (UPI) and digital wallets have seen rapid adoption, credit card acceptance infrastructure still faces variability in technological readiness. The need for specific hardware and software can be an obstacle for smaller merchants, who may find it easier to accept Visa and Mastercard, which have broader compatibility.
However, American Express is actively working to address these challenges and expand its acceptance in India. The company is focusing on signing up more merchants, increasing coverage in Tier 2 and Tier 3 cities, and strategically shifting attention to everyday spending categories. Amex is also innovating with new payment methods, such as PayByLink, contactless payments, and SoftPoS, to provide merchants with a range of options. Additionally, Amex has been adding a significant number of new cards in India, indicating renewed interest in its offerings.
Despite the challenges, some merchants do accept Amex because they recognize the value that Amex cardholders bring. Amex is often associated with customers who have higher spending power, and merchants may be willing to pay the higher MDR to attract these customers and foster better merchant servicing.
Ultimately, the decision of whether or not to accept American Express cards in India is a complex one for merchants, weighing the costs and benefits in the context of their specific business needs and customer base. While challenges remain, Amex is actively working to broaden its acceptance and cater to the evolving needs of the Indian market.
