Your Guide to Understanding and Comparing Payment Processor Pricing

Unravelling the costs associated with accepting payments can be a difficult feat. To help you understand what you pay to get paid, we’re going to look at a transaction breakdown and the different players who have a hand in processing your transactions. We’ll answer a few important questions like:

• What factors contribute to the determination of the rate?

• How much is deducted from each transaction?

• Where do the fees go?

Merrco's Model

Merrco utilizes the Interchange Plus model, which provides the most transparency and the most understandable fees and terms. The pricing is made up of the interchange rate of the card added to a transparent markup (a fixed percentage or basis points) and a per transaction fee. This pricing structure is often lauded as the fairest model in the industry.

Say you're processing a transaction volume of $100,000 per month. With some providers, the per-transaction fee could be as high as 2.1% + $0.15. On the other hand, Merrco's more competitive rates could end up saving you thousands of dollars annually.

Factors that contribute to the determination of the rate:

• Processing volumes: This determines which type of processor best suits your business. The higher you process, the more you’ll save with tailored fees.

• Card types: There are many different types of credit/debit cards – and each of them has a different interchange rate (the wholesale “cost” of a credit card). A basic no-rewards, no-points credit card will cost less to accept than a corporate rewards card.

• Type of retailer: Some industries and businesses are considered higher risk, which correlates to a higher rate.

• Type of transaction: Whether you insert, tap or swipe your customer’s card through a traditional terminal in your brick-and-mortar store or you process an online payment will affect your rate. The same goes for when you key-in a phone or mail order versus processing the card in-person manually. Card not present transactions have a higher rate because of the increased inherent risk.

A credit card transaction breakdown

The below example depicts a hypothetical Visa card, in-store, transaction of $100, at a rate of 2.1% + $0.15.

​Fee	Percentage	$ that goes to each party
Interchange	1.50%	$1.50 goes to the issuer
Payment Processor markup	0.51%	$0.51 goes to payment processor
Card Brand Fee	0.10%	$0.10 goes to card brand
Transaction fee	$0.15	$0.15 goes to payment processor

$1.50 goes to the issuer.

This is known as the interchange fee. It goes to the issuer, a financial institution that issues the credit cards to consumers on behalf of card brands, sends credit card statements, and offers credit. These are the bank brands that you would see on credit cards, such as an RBC Visa.

$0.51 goes to the payment processor.

A portion of your fees goes to the payment processor. These are the companies that partner with acquirers to maintain the merchant account, handle support, manage payment processing, and build added-value technology on behalf of acquirers.

$0.09 goes to the card brand.

This is the card brand fee that is paid to the card brand. They are more commonly known as credit and debit card companies, such as Visa, MasterCard, etc. Card brands govern the policies pertaining to their bank cards, monitor processing activity, and oversee the clearing and settlement of transactions.

$0.05 goes to the payment processor.

This is a dollar amount that is added to each transaction known as the transaction fee. It goes to the processor or acquirer, who solicits, underwrites, and owns the merchant account. Processors and/or acquirers pass credit card information on behalf of the merchant, to the card brands so that a transaction can be completed. Processors and acquirers provide technology and hardware to process payments.

$97.85 goes to you, the merchant.

Once the fees are taken from the transaction, the remaining amount is deposited into the merchant’s account within 1-2 business days, typically. Funding times can vary depending on the type of payment processor you decide to partner with: an aggregator or a merchant account provider.

A Debit Card transaction breakdown

The fees associated with accepting debit card payments are typically lower than credit card fees. Interac fees for merchants are typically based on a flat fee per transaction, usually around $0.05 to $0.10 cents per transaction, regardless of the transaction amount. However, the exact fees can vary depending on the merchant’s industry, transaction volume, and some other factors.

Around 70% of your transaction volume for cannabis retailers is likely to come from debit, making competitive debit transaction pricing an example of how Merrco caters specifically to the cannabis industry.

WTF? (Why the fees?)

To illustrate why the different entities take a cut of each transaction, think of it this way: the card brands are the wholesalers. They don’t deal directly with consumers; they only deal with banks (issuers and acquirers). The card brands allow the issuer to issue co-branded credit cards to consumers and acquirers to acquire merchants to accept credit cards. In turn, some acquirers are able to process payments themselves, while other acquirers allow third-parties (payment processors) to use their services as well as further innovate payment technology to bring more value to merchants. Payment processors allow a way to accept credit cards from multiple brands, issuers, and networks in a single, efficient way. Each entity plays a role in processing transactions and takes a small fee for doing their part.

Breaking Down the Costs: Merrco vs. Other Industry Providers

At Merrco, we provide transparent and straightforward pricing. Here's a comparative example (without naming names) to illustrate how our fees measure up against some competitors.

Say you're processing a transaction volume of $100,000 per month. With some providers, the per-transaction fee could be as high as 2.1% + $0.15. On the other hand, Merrco's more competitive rates could end up saving you thousands of dollars annually.

The Potential Hidden Costs of Switching Payment Processors

Switching processors often comes with hidden costs. Setting up new equipment, training your staff, and even early termination fees can make switching more expensive than it appears.

The Merrco Advantage

We understand that it is important to understand where your hard-earned dollar is going so you know the true overhead of your business. Understanding what you pay to get paid helps you understand whether you’re paying a fair rate or if you’re getting gouged.

Merrco utilizes the Interchange Plus model, which provides the most transparency and the most understandable fees and terms. The pricing is made up of the interchange rate of the card added to a transparent markup (a fixed percentage or basis points) and a per transaction fee. This pricing structure is often lauded as the fairest model in the industry.

Furthermore, we understand that 70% of transaction volume for cannabis retailers is likely to come from debit, making competitive debit transaction fees a priority for Merrco. Our debit rates compare favorably to nearly every option in the market and will often come in lower than many introductory or promotional pricing offers.

If you would like more information on how payment processing fees work or how Merrco’s pricing compares to other processors in the market, don't hesitate to reach out to us at info@merrco.com or 1-800-957-0534.