Acquiring Pricing Models

In FinTech Futures, Marina Titova, Business Analyst at DataArt, explains blended and interchange++ merchant pricing models, comparing each model's pros and cons.

«Acquirers can choose between two options related to merchant pricing models – blended and interchange ++.

Both pricing models include interchange fee rate and scheme fee rate required by the payment system and acquiring fee that includes the acquiring bank margin.

Merchant Fee = Interchange Fee + Scheme Fee + Acquiring Fee

But the principal difference in these pricing models is the interchange fee value calculation.

We have noted that the interchange fee depends on the transaction properties. In the blended pricing model, the interchange fee may be predicted as a fixed value using payment interchange rates and the usual transaction scope for the existing merchants.

For example, transaction scope can be divided by the region (domestic/intraregional/interregional) and transactions conditions (card present/card not present). So, in a blended pricing model, the interchange fee values might be limited by maximum or average available rate in the payment systems interchange fee specifications – depending on the transaction properties (card present/not present and the region) or any other groups relevant for the particular acquirer.

Acquirers who use the interchange ++ pricing model calculate the interchange transaction fee based on the payment systems requirements on the acquiring side. The acquiring processing platform may support a new module of interchange fee calculation or may have a separate system that pre-calculates the same fee as the payment system. Merchants using the interchange ++ pricing model are charged an accurate pre-calculated fee. Such models are more attractive for merchants because they receive clear transaction statements with detailed information about the interchange fee paid to the payment system.»

Original article can be found here.

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