Who profits from your payments? Dissecting a $100 transaction
We know many parties get a piece of the pie, but who gets what from each transaction and how much do you, the merchant, get to keep?
Below is a visual representation of a $100 sale showing you who gets what and how much is left after being charged for processing the transaction. This "dissection" is using the most transparent pricing model, Cost Plus Pricing (or interchange plus pricing).
It's important to understand what happens when a customer pays with their payment card, the different fees that are associated with a transaction, and the different players in the industry that profit from a transaction.
*Interchange rate → Issuing Bank
Assessment fee → Card Brand
Authorization fee → Acquiring Bank
Markup → Payment Processor (Paystone)
As a refresher, the issuing bank is your customer's bank of choice and credit card issuer (i.e. Scotiabank). The acquiring bank is the financial institution that permits you, the merchant, the right to process payments by opening a merchant account (i.e. Elavon). As well, the interchange rate is paid to the issuer; it represents the cost of accepting payments from a specific credit card type (i.e. Visa Infinite) and is set by the card brand (Visa). The assessment fee is a small percentage that is charged on every credit card transaction and paid to the card brand. And lastly, the authorization fee is a dollar amount charged each time a transaction is approved or declined and paid to the acquirer.
Remember, as a merchant you don't have to