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however, as frequent changes in interchange rates and Mellin said it's not uncommon to find inflated fees on
market conditions rendered it tough to manage. Today statements, particularly among ISOs and acquirers that
blended pricing is primarily used by companies like advertise very low effective rates. "For some, the only way
Square and PayPal. they can make money is by padding everything," she said.

Tiered pricing (also known as bundled or bucket pricing) Steven Feldshuh, President of Merchants Choice Payment
is perhaps the most complex pricing model in bankcard Solutions East, said, "Assessments typically range from .12
acquiring. It typically employs three pricing tiers/buckets to .14 percent, but are priced at .15 to .19 percent. Another
– qualified (applied to standard credit cards), mid- area of assessments is something called a MC NABU fee
qualified (key-entered transactions) and non-qualified or Visa Access fee, which normally falls into the range
(rewards and other specialty cards). It's also common to of $0.0195 to $0.0155, but is frequently marked up. When
find numerous other buckets with different rates that assessment fees are doubled, the amounts may be small,
kick in when transactions are downgraded for processor/ but everything adds up."
acquirer-specific reasons.
Greg Mallin, Business Development Consultant at
With interchange pass-through, a flat per-item charge and BillingTree, emphasized the importance of helping
a flat basis point surcharge gets added to the assigned clients understand their statements. "We try to help them
interchange rate and associated dues and assessments that understand how different things impact the pricing
are levied by the card brands. "This represents the most model," he said. Such determinative factors are the
honest and straightforward pricing method out there. It's technologies merchants are using, Payment Card Industry
completely transparent," Martaus said. Data Security Standard compliance, their integration
partners, etc.
Interchange plus is similar to pass-through and a more
commonly offered pricing model. It's a flat markup, Feldshuh said one of the biggest challenges working with
regardless of the type of card used. The markup consists prospects and reviewing their statements comes down to
of a fixed percentage (for example, 50 basis points) of matching interchange categories and descriptions with
the total value of card transactions processed in a given published rates. Processing statements that bundle fees
month, plus a fixed amount (usually expressed in cents) into a single total are simple enough to analyze, but others
per transaction. make it nearly impossible to determine true effective rates,
because they carry over fees from previous months or fail
"Interchange plus-plus is the latest variation on the to break out related costs.
interchange-plus theme," Martaus said. It adds more than
just basis points and pennies to the cost of interchange, "The payments industry needs to regulate pricing
by introducing other assorted fees and markups of things disclosure and standardize merchant statement reporting,"
like dues and assessments. Also contributing to pricing he said. "Some acquirers have clear, transparent pricing
variability are charges assessed by acquirers, such as one- guidelines, but others sell interchange-plus, hiding
time setup fees, recurring account maintenance fees and additional mark-ups in fine print in their merchant
PCI-compliance fees. applications."
Statement analysis as sales tool Debit network fees can also be misleading, Feldshuh

The existence of hundreds of interchange rates, and noted. Many merchants view PIN debit as less expensive
acquirer-specific models for marking up these wholesale than swiped signature debit; however, a host of ancillary
costs, has rendered statement analysis a critical component costs and switch fees can make PIN debit transactions
of the merchant sales process. A careful, line-by-line more expensive than swiped signature debit transactions,
analysis of a merchant's monthly processing statements he added.
will reveal a true, effective per-transaction rate inclusive
of marked-up dues, assessments and other fees, experts This is especially true for cards that qualify for interchange
stated. caps. The Durbin Amendment to the Dodd-Frank Act
instructed the Fed to cap interchange on transactions
It's an educational process, said Dave Yohe, Vice President initiated using debit cards from the largest issuers, or
of Marketing at BillingTree. Educating clients and about 80 percent of all debit cards in circulation. That cap
prospects about factors that impact rates – such as card ranges from 21 to 24 cents per transaction.
data entry, access channels and integration partners – is
a critical part of the business relationship. "We work with Bottom line: no simple formula for pricing bankcard card
clients to educate them about the differences between acquiring exists, but armed with knowledge about pricing
published interchange rates and what they see when their practices and statements, as well as the business and its
statements come in," Yohe said. industry sector, merchant services providers can offer real
value to prospects and clients.

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