Business Pricing Models

Every time a card payment is processed, 𝘁𝗵𝗿𝗲𝗲 main types of fees are involved. Here’s a simple breakdown of the Three Core Fees: 1️⃣ Interchange Fee This is paid by your acquiring bank (or payment processor) to the cardholder’s bank (the issuer). It’s set by the card networks (like Visa and Mastercard; sometimes regulated), and is designed to cover things like fraud, credit losses, and infrastructure costs. 2️⃣ Scheme Fee Charged by the card networks themselves, this fee covers the operation of the payment system (“rails” that process the transaction). 3️⃣ Acquirer Markup This is the fee your acquirer or payment service provider (PSP) charges you, the merchant. It includes their costs, risk management, and profit margin for processing and settling the payment. The total cost a merchant pays is called the Merchant Service Charge, which is the sum of these three components. The Main Pricing Models: ► Bundled Pricing All fees are grouped into one flat rate. This is very common with small businesses. It’s easy to understand but doesn’t provide insight into what you’re actually paying for. ► Interchange+ The interchange fee and the acquirer’s fee are shown separately, but the scheme fee is typically bundled with the markup. This model offers some transparency. ► Interchange++ Each fee—the interchange, scheme, and acquirer markup—is itemized separately. This is the most transparent model and is favored by larger or multi-country merchants who want to track costs precisely. Who Chooses the Pricing Model? Most acquirers and PSPs decide what pricing model you’re offered. Unless you negotiate or have significant transaction volume, you’re likely to get bundled pricing by default. Larger or more experienced merchants who understand payments often push for Interchange++ for its clarity and fairness. Smaller merchants often aren’t aware that alternatives exist or find it difficult to compare offers. How Interchange Fees Vary Globally: Some regions (like the EU, UK, China, and Brazil) cap interchange fees to lower costs for merchants and stimulate competition. The US regulates only part of the system—such as capping debit card fees for large banks (the Durbin Amendment)—while credit card interchange remains uncapped and usually higher. Other countries, like India and Brazil, regulate interchange as part of broader financial inclusion goals. In markets with stricter regulation, merchants often benefit from lower, more predictable fees, making it easier to accept cards. Where fees are higher and less regulated, issuers can offer consumers more rewards (like cashback), but those costs are passed back to merchants—and sometimes their customers. Every model shifts the balance of costs and benefits between banks, merchants, and consumers in different ways. More info below👇, and I highly recommend reading my complete deep dive article about Interchange Fee and what factors impact the rate: https://bit.ly/44T4VJA

Every card payment involves three core fees - yet most merchants don’t know where their money goes. Here is a break-down. 𝗧𝗵𝗲 𝟯 𝗳𝗲𝗲 𝘁𝘆𝗽𝗲𝘀: 1. Interchange – Paid from the acquirer to the issuer (the cardholder’s bank). Set by card networks, often regulated, and meant to cover fraud, credit risk, and infrastructure. 2. Scheme Fee – Charged by the card networks (Visa, Mastercard, etc.) for operating the rails. 3. Acquirer Markup – What the acquiring bank or PSP charges the merchant to process the transaction, handle risk, and settle funds. Together, these form the Merchant Service Charge. 𝗧𝗵𝗲 𝟯 𝗽𝗿𝗶𝗰𝗶𝗻𝗴 𝗺𝗼𝗱𝗲𝗹𝘀: 1. Bundled: All three fees are merged into one opaque rate. Common among smaller merchants. Simple, but lacks visibility. 2. Interchange+: Interchange and acquirer fee shown; scheme fee included in the markup. Partial transparency. 3. Interchange++: All three fees itemized. Full transparency. Preferred by larger or multi-market merchants. 𝗪𝗵𝗼 𝗱𝗲𝗰𝗶𝗱𝗲𝘀 𝘁𝗵𝗲 𝗺𝗼𝗱𝗲𝗹? - The acquirer or PSP typically offers the pricing model, and unless a merchant has the volume or experience to negotiate, they’re often placed on bundled pricing by default. - Larger merchants or platforms - who understand the mechanics and can estimate true costs - usually push for Interchange++ for its transparency and fairness. - Smaller businesses rarely ask, either because they don’t know the models exist, can’t easily compare offers, or assume it’s not worth the effort. 𝗜𝗻𝘁𝗲𝗿𝗰𝗵𝗮𝗻𝗴𝗲 𝗳𝗲𝗲𝘀' 𝗰𝗼𝗺𝗽𝗮𝗿𝗶𝘀𝗼𝗻: Some jurisdictions cap interchange fees (EU, UK, China, Brazil) to reduce merchant costs and promote competition. Others (US) regulate only parts of the system - e.g., debit under Durbin for large banks - while leaving credit cards uncapped. Why? It’s a mix of politics, lobbying, market structure, and regulatory philosophy: - In Europe, regulators treat interchange as  as insufficiently competitive and have imposed caps to bring more balance and transparency. - In the US, the market relies more on competition, resulting in higher fees. - Emerging markets like India and Brazil regulate interchange as part of broader financial inclusion efforts. - In regulated markets, lower and more predictable fees help merchants manage costs and often support broader payment acceptance. In unregulated markets, higher interchange allows issuers to fund consumer perks like cashback and rewards - but merchants may face higher costs, which can influence pricing or acceptance choices. Each model shifts value differently across the ecosystem, affecting how costs and benefits are distributed between banks, merchants, and consumers. What's your experience? Opinions: my own, Graphic sources: Paypr.work [ˈpeɪpəwəːk], Truevo, Panagiotis Kriaris 𝐒𝐮𝐛𝐬𝐜𝐫𝐢𝐛𝐞 𝐭𝐨 𝐦𝐲 𝐧𝐞𝐰𝐬𝐥𝐞𝐭𝐭𝐞𝐫: https://lnkd.in/dkqhnxdg

𝟒-𝐏𝐚𝐫𝐭𝐲 𝐌𝐨𝐝𝐞𝐥 & 𝐊𝐞𝐲 𝐏𝐚𝐲𝐦𝐞𝐧𝐭 𝐅𝐞𝐞𝐬 𝐄𝐱𝐩𝐥𝐚𝐢𝐧𝐞𝐝 by Checkout.com 👇 ► Interchange fees are a critical part of card payments, representing the fee paid by the acquiring bank to the issuing bank for processing a transaction. They are set by card schemes (Visa, Mastercard, etc.) and vary based on factors like card type, transaction method, and region. Merchants indirectly pay interchange fees as part of their total Merchant Discount Rate (#MDR), which includes: ✔ Interchange Fees → Paid to the issuing bank (Chase, Wells Fargo). ✔ Card Scheme Fees → Paid to the card networks (Visa, Mastercard). ✔ Acquirer Fees → Paid to the acquiring bank or PSP (Checkout.com, Adyen). — 𝐈𝐧𝐭𝐞𝐫𝐜𝐡𝐚𝐧𝐠𝐞 𝐅𝐞𝐞𝐬 𝐄𝐱𝐩𝐥𝐚𝐢𝐧𝐞𝐝: ► $100 transaction 1️⃣ The customer pays $100. 2️⃣ The acquirer (Checkout.com,Adyen) deducts fees before settling the funds with the merchant. #MDR 1.57% + $0.23 → $1.80 goes to the Acquirer to be distributed across all parties. 3️⃣ Interchange fees (paid to the issuing bank, Chase, Wells Fargo) are deducted: 1.23% + $0.10 → $1.33 goes to the Issuer (deducted from $1,80) 4️⃣ Card scheme fees (paid to Visa, Mastercard, etc.) are deducted: 0.15% + $0.10 → $0.25 goes to the card scheme (deducted from $1,80) 5️⃣ The merchant receives the remaining amount: $98.20. — 𝐖𝐡𝐚𝐭 𝐢𝐬 𝐭𝐡𝐞 𝟒-𝐏𝐚𝐫𝐭𝐲 𝐌𝐨𝐝𝐞𝐥 & 𝐡𝐨𝐰 𝐝𝐨𝐞𝐬 𝐢𝐭 𝐢𝐦𝐩𝐚𝐜𝐭 𝐈𝐧𝐭𝐞𝐫𝐜𝐡𝐚𝐧𝐠𝐞 𝐅𝐞𝐞𝐬? The 4-party model is the foundation of card payments, involving the Cardholder and: 1️⃣ Merchant  2️⃣ Acquirer (Merchant’s Bank)  3️⃣ Issuer (Cardholder’s Bank)  4️⃣ Scheme (Card Network) 𝐖𝐡𝐚𝐭 𝐀𝐟𝐟𝐞𝐜𝐭𝐬 𝐈𝐧𝐭𝐞𝐫𝐜𝐡𝐚𝐧𝐠𝐞 𝐅𝐞𝐞𝐬? ► Card Network — Visa, Mastercard, American Express have different rates ► Card Type — Debit, credit, premium, commercial cards have varying fees. ► Transaction Type: Card Present or Card Not Present ► Merchant Category Code (MCC) — Different Industry Types ► Geography — Fees vary by region due to regulation (EU has capped interchange fees) — 𝐇𝐨𝐰 𝐝𝐨 𝐌𝐞𝐫𝐜𝐡𝐚𝐧𝐭𝐬 𝐏𝐚𝐲 𝐈𝐧𝐭𝐞𝐫𝐜𝐡𝐚𝐧𝐠𝐞 𝐅𝐞𝐞𝐬? ► 𝐈𝐧𝐭𝐞𝐫𝐜𝐡𝐚𝐧𝐠𝐞 𝐏𝐥𝐮𝐬 (IC+) → A transparent pricing structure, where merchants pay, here is an concrete example for $100: 👉 Interchange fee (Chase) → $1.33  👉 Scheme fee (Visa, Mastercard) → $0.25 👉 Acquirer fee (Checkout.com, Adyen) → $0.22 👉 Total Fees for Merchant: $1.80 👉 Merchant receives: $98.20 ► 𝐁𝐥𝐞𝐧𝐝𝐞𝐝 𝐏𝐫𝐢𝐜𝐢𝐧𝐠 → A simpler, fixed-rate model where the merchant pays one flat percentage per transaction, covering everything: ~ 2.6% + $0.15 While easier to manage, blended pricing can be more expensive than Interchange Plus, as it bundles all costs into a higher flat rate. 🚨 Note: The numbers vary from region to region - U.S. vs EU vs etc.. — Source: Checkout.com x Connecting the dots in Payments... ► Sign up to 𝐓𝐡𝐞 𝐏𝐚𝐲𝐦𝐞𝐧𝐭𝐬 𝐁𝐫𝐞𝐰𝐬 ☕: https://lnkd.in/g5cDhnjC ► Connecting the dots in Payments... | Marcel van Oost

I've reviewed 100+ payment processor contracts in the last year. Most founders are getting quietly robbed by "simple" pricing. Here's what they're hiding: Blended Pricing Is a Shell Game Stripe charges you 2.9% + $0.30 flat. Sounds simple. But it hides where your money actually goes. Here's the actual breakdown: 1. IC = Interchange (The Unavoidable Tax) This goes directly to the card-issuing bank. Visa sets it. Mastercard sets it. You can't negotiate it. 2. IC+ = Interchange + Scheme Fees Now you're also paying the card networks (Visa/Mastercard). Cross-border fees. Assessment fees. Network access fees. Brand usage fees. Can easily add ~0.15% on top of interchange. 3. IC++ = The Real Cost Structure Interchange + Scheme Fees + Processor Margin. This is how sophisticated businesses pay. Processors love Blended Pricing because they make more when you use expensive cards. If 60% of your customers use US debit (1.2% IC), but you're paying 2.9% flat, they pocket 1.7%. Understanding this breakdown allows businesses to know exactly where their money is going and make a change. What fees are you paying?

𝐂𝐚𝐫𝐝 𝐩𝐚𝐲𝐦𝐞𝐧𝐭 𝐟𝐞𝐞𝐬: 𝐦𝐞𝐫𝐜𝐡𝐚𝐧𝐭𝐬 𝐭𝐡𝐢𝐧𝐤 𝐭𝐡𝐞𝐲 𝐩𝐚𝐲 𝐨𝐧𝐞 𝐟𝐞𝐞. 𝐓𝐡𝐞𝐲'𝐫𝐞 𝐚𝐜𝐭𝐮𝐚𝐥𝐥𝐲 𝐩𝐚𝐲𝐢𝐧𝐠 𝐟𝐨𝐮𝐫. "Processing fee" is the term merchants use. But that single line item is actually four separate fees, charged by four different parties, bundled into one number on a statement. Here's who's actually getting paid, and for what. 𝐈𝐧𝐭𝐞𝐫𝐜𝐡𝐚𝐧𝐠𝐞 𝐟𝐞𝐞 - issuer gets paid ➥ Charged by the issuer to the acquirer, for handling the card payment. ➥ Set by the card schemes - usually a percentage plus a fixed amount. ➥ Varies by card type, online vs in-store, merchant industry, location, and issuing country. 𝐂𝐚𝐫𝐝 𝐬𝐜𝐡𝐞𝐦𝐞 𝐟𝐞𝐞 - network gets paid ➥ Charged by the scheme (Visa, Mastercard, etc.) to the banks, for running the rails the transaction travels on. ➥ Usually bundles an assessment fee, a per-transaction fee, a cross-border fee, and an authorization fee. ➥ Also called a network or assessment fee — same thing, different name. 𝐀𝐜𝐪𝐮𝐢𝐫𝐞𝐫 𝐟𝐞𝐞 - acquirer gets paid ➥ Charged by the acquirer to the merchant, for facilitating the transaction. ➥ Varies by merchant size, sector, and geography — the one part of the stack that's actually negotiable. 𝐈𝐬𝐬𝐮𝐞𝐫 𝐟𝐞𝐞 - cardholder pays this one ➥ Charged by the issuer directly to the cardholder. ➥ Per-transaction fee, interest, one-time card fee, or a monthly fee. ➥ The only fee in this chain the merchant never sees. 𝐒𝐨 𝐰𝐡𝐚𝐭 𝐝𝐨𝐞𝐬 𝐚 𝐦𝐞𝐫𝐜𝐡𝐚𝐧𝐭 𝐚𝐜𝐭𝐮𝐚𝐥𝐥𝐲 𝐩𝐚𝐲? The 𝘔𝘦𝘳𝘤𝘩𝘢𝘯𝘵 𝘋𝘪𝘴𝘤𝘰𝘶𝘯𝘵 𝘙𝘢𝘵𝘦 (𝘔𝘋𝘙) - one rate bundling interchange, scheme, and acquirer fees. How it's bundled depends on the pricing model: 👉 𝐅𝐥𝐚𝐭 𝐫𝐚𝐭𝐞 (𝐛𝐥𝐞𝐧𝐝𝐞𝐝): One averaged rate per transaction. Simple, but no visibility - and likely overpaying on low-cost transactions to subsidize high-cost ones. 👉 𝐈𝐧𝐭𝐞𝐫𝐜𝐡𝐚𝐧𝐠𝐞+: Real interchange shown separately, plus one combined markup for scheme + acquirer fees. 👉 𝐈𝐧𝐭𝐞𝐫𝐜𝐡𝐚𝐧𝐠𝐞++: All three layers shown separately. Full visibility into where every basis point goes. The fee model you're on determines how much pricing leverage you actually have. Flat rate feels simple - but it's the model with the least visibility, and usually the worst unit economics at scale. If you're processing meaningful volume, asking your acquirer to move you to Interchange++ is one of the highest-leverage questions in the entire stack. ♻️ Reshare if this helped clarify where your processing fee actually goes 💬 Which pricing model are you on - flat rate, Interchange+, or ++? Curious how common each one still is 👍 Like to help more people in payments see this #Payments #CardPayments #PaymentsProcessing #Fintech #Interchange #MDR #Acquirer #Merchant #PaymentsEngineering #ProductManagement Visa Mastercard JUSPAY

Where does your money go when a customer pays with a card? Most merchants don’t realize that every card payment includes three distinct fees and understanding them can make a big difference in negotiating better rates. The 3 Core Fees: 1. Interchange Fee - Paid by the acquirer to the cardholder’s bank (issuer) - Set by card networks (Visa, Mastercard, etc.) Covers fraud risk, credit, and infrastructure 2. Scheme Fee - Charged by card networks for operating the payment rails 3. Acquirer Markup - Charged by your bank or PSP for processing and settlement Together, these form your Merchant Service Charge. The 3 Pricing Models: Bundled - All fees merged into one opaque rate — common among smaller merchants. Easy, but lacks transparency. Interchange+ - Interchange and acquirer fee shown; scheme fee blended in. Offers partial transparency. Interchange++ - All three fees are itemized. Full transparency, preferred by large or multi-location businesses. Who Decides the Model? - Your acquirer or payment service provider (PSP) typically sets the default. Smaller merchants are often placed on bundled pricing due to limited awareness or negotiation power. - Larger and more experienced businesses usually request Interchange++ for greater clarity and cost control. Global Interchange Fee Practices (including Canada): ➖ Europe – Regulated and capped to reduce merchant costs and promote competition ➖ Canada – Interchange fees are under regulatory scrutiny with voluntary reductions to support small businesses ➖ United States – Partially regulated (e.g., Durbin on debit); credit card fees remain high ➖ India and Brazil – Regulated as part of financial inclusion and digital payment strategies What It Means for Your Business: In regulated markets, lower and more predictable fees help manage costs and support wider card acceptance. In unregulated markets, higher fees help fund consumer perks (like cashback and rewards), but increase the burden on merchants. Understanding your pricing model can help protect your margins and drive smarter decisions. Is your business on the right pricing model? #MerchantServices #Payments #InterchangeFees #Fintech #RetailOperations #CostManagement #CardPayments #DigitalCommerce #CanadianBusiness #PaymentProcessing #SmallBusinessTips #FinancialTransparency #BusinessStrategy

For the vertical SaaS leaders out there who are unfamiliar with interchange-plus (IC+)... this one’s for you 🫵 IC+ pricing means you pay the actual interchange rate (set by Visa/Mastercard) plus a negotiated processor markup. It's transparent and usually cheaper than blended pricing. BUT…  your costs now fluctuate based on card type, transaction category, and network rate changes. If you recently decided to move to IC+ pricing… well, you now own interchange risk 👀 Most platforms think IC+ is just about transparency and better economics. It is... but it's also about constant monitoring, optimization, and financial exposure that most platforms aren't prepared for. Here's what you're actually signing up for: 1️⃣ Tracking interchange fluctuations monthly 2️⃣ Managing upcharges for edge cases (Amex transactions, international cards, business/rewards cards)  3️⃣ Staying current with category changes (miss one interchange rate table update and you’re suddenly underwater) 4️⃣ Worrying about financial exposure (when card mix changes and passthrough costs spike, are you eating the cost or do you have a plan in place to monitor fluctuations and adjust pricing?) Most payment providers hand you IC+ pricing and wish you luck. At Rainforest, we built IC+ management into the product. ✅ Built-in rate tracking and reporting ✅ Proactive optimization ✅ Flexible upcharge handling ✅ End-to-end management of interchange exposure IC+ pricing CAN give you bigger margins. But only if you can actually optimize it.