In the world of payment processing, merchants face a maze of pricing options, with Interchange++ and Blended pricing being two prominent choices. For a payment acquirer, understanding these pricing models becomes paramount not only for effectively serving merchants but also for navigating the competitive landscape. What do these pricing models look like, and which one is more beneficial for your business? Read more and find out!
Interchange ++
The Interchange++ (or IC++) pricing model is a clear price breakdown into three parts:
The interchange fee – this fee is assessed by the issuing bank (consumers) to the acquiring bank (merchants), and fluctuates based on transaction specifics, such as card-present status and the card category, like corporate or consumer;
The scheme fee – imposed by card providers (such as Visa, Mastercard, or American Express) on the acquiring bank as a usage charge for employing their systems;
The acquirer or processing fee – a fee from the payment service provider, serving as a surcharge for utilizing the services, including the gateway access.
When choosing the IC++ pricing model, the merchant receives a full breakdown of each fee included in his pricing of the transaction. This offers transparency and usually results in an overall lower fee for one transaction.
Blended pricing
Blended pricing is a simpler pricing model than IC++. Even though it still covers all the three fees mentioned above, it’s one combined cost for the transaction. Although this model may lack transparency regarding individual fees, it provides businesses with greater predictability of their expenses. Typically, this pricing model entails a fixed percentage of the transaction value along with a predetermined transaction fee, offering businesses a clear understanding of their cost structure upfront.
Which pricing model to choose?
Each business has different needs and requirements when it comes to pricing. But there are some things to consider that might help to decide which pricing model would be more suitable for your business. Here are some of them:
Transaction volume
If your business has a lot of domestic and international transactions, choosing an IC++ pricing model can result in lower costs overall. Domestic and international transactions have different fees, so if you have a blended pricing model, the price for domestic transactions can be higher than it could be with the IC++ model.
But if your business doesn’t have a lot of transactions, a blended pricing model can be more effective and useful. While it may offer a less detailed fee overview, it provides simplicity and predictability in pricing, making it easier for businesses to budget and forecast expenses.
Cost transparency
Choosing between two pricing models often comes down to the level of transparency desired by the business. Transparency is crucial for understanding the breakdown of fees associated with each transaction, which can have a significant impact on the overall cost of payment processing. The level of transparency that IC++ is offering is particularly beneficial for businesses with higher transaction volumes and those that process a diverse range of transactions locally and internationally.
But if that is not a need, going with the blended pricing model might be a good option. It helps to keep your business finances planned and be more predictable about upcoming expenses.
If you’re still unsure what price model suits your business best, our representatives are here to help you. Customised solutions for your business and a lot of different features and benefits from PAYSTRAX – your payment service provider!
