Pricing and Interchange

Question 1

Is interchange optimization available with aggregator payment services like Stripe, Square, or Paypal?

Answer 1

no

Question 2

How can you use VAR sheets?

Answer 2

to integrate any third-party e-commerce software like shopping carts, payment processors, and gateways.

Question 3

What does “VAR” sheet stand for?

Answer 3

value-added reseller

Question 4

What is a VAR sheet?

Answer 4

document that contains merchant account info (TSYS, Fiserv, etc), busniness details, volume limits, MID, idustry code (MCC or SIC)

Question 5

What is a TID?

Answer 5

Terminal ID

Question 6

List the various ways to price solutions.

Answer 6

Interchange Plus, Flat Rate, Surcharge, Tiered

Question 7

What is Flat Rate pricing?

Answer 7

A single rate (often % of the sale amount
+ $ per transaction), regardless of card type. Easier to understand than interchange.
Most commonly used when: There is a need to price often and simply, removing the need for pricing negotiation. The need for competitive pricing is less than the need for fast and simple merchant acquisition.
Example: Etsy and Square are examples of Flat Rate Pricing.

Question 8

What is Tiered pricing?

Answer 8

A few “buckets” of pricing are created, traditionally based on qualified, non-qualified and mid-qualified transactions. The transactions are billed at the bucket rate rather than actual interchange. This allows a merchant to pay less for lower- interchange transactions, while still being isolated from the full complexity of interchange billing.
For example: A merchant is provided with 4 buckets:
- Debit
- Qualified (standard credit cards)
- Non Qualified (rewards cards)
- Mid-Qualified (CNP)

Question 9

What is Interchange Plus pricing?

Answer 9

The most transparent of the pricing
models, gives merchant full visibility into the interchange fees and markup they pay on all transactions. Ensures the ISO will never eat the cost of interchange.
Most commonly used with large scale/enterprise merchants who are willing to deal with the complexities and fluctuations of their statements in order to get the best pricing.

Question 10

What is Interchange and how does it work?

Answer 10

Interchange is the fee collected by the card brands, to cover the cost of the card to the issuer.

These costs can include:
- Cashback or rewards offered to the cardholder per transaction
- The costs of using the card network
- The risk of chargebacks and fraudulent use

Factors such as the MCC, the entry method used for transaction, the card brand, and the specifics of the actual card used all influence the interchange fee.

Question 11

What info is included in a merchant statement?

Answer 11

• Header Information (merchant’s business information)
• Deposit Information (daily account of the month’s transaction information)
• Deposit Item Summary (a summary of the month’s transactions)
• Settlement/Discount (the month’s transactions sorted by card type and fees associated)
• Surcharges (downgraded transactions)
  > Description = downgrade description
  > Fee Amount = total dollars charged for each downgrade type
• Other fees
• Total Debited or Credited

Items = number of transactions that qualified for a particular downgrade

Question 12

What are the various categories of interchange?

Question 13

Describe the flow of a transaction.

Question 14

How does interchange flow between the acquirer and issuing partners?

Question 15

List the various fees that can be assessed to a merchant?

Question 16

Define the various transactions that qualify for each rate?

Question 17

What is the difference between internet gateway and virtual terminal?

Question 18

What determines a given interchange qualification category?

Answer 18

A wide range of factors:

• Processing Method — Card present vs. card-not-present. Swipe, dip, tap, or keyed.
• Transaction Data — Information provided with each transaction.
• Merchant Category Code — Based on the type of business you have.
• Card Brand — Visa, Mastercard, American Express, Discover.
• Card Type — Credit vs. Debit, Rewards credit card vs. non-rewards, etc.
• Cardholder — Cards issued to businesses, corporations, or municipal agencies have different interchange categories than traditional consumer credit cards.

Question 19

What is interchange optimization?