Demystifying payment processing fees: Blended vs. Interchange Plus rates

In the rapidly evolving landscape of today's business world, understanding the DNA of your company's cost structure isn't just smart – it's essential for propelling sustainable growth. No doubt, you and your dedicated team have invested considerable time and effort untangling the intricate web of payment processing expenses. But have you ever found the answers you were looking for?  Look no further, for this article holds the solutions you seek.

As the Strategic Sales Manager at Smeetz, I've been in the frontlines, tackling the payment processing puzzle head-on. I've helped leaders like you decipher payment processing fees, guiding your ship toward the shores of informed decisions and savvy choices. Inside these lines, we're about to unleash the concealed gems hiding behind payment processing fees, zooming in on the two prevailing pricing frameworks: Blended Rates, the most commonly provided model and Interchange Plus, the less known, while more advantageous model.  

Get ready to dive into an exclusive guide that's about to armor your business, unleashing the full force of your revenue streams. Your voyage to growth begins here! 🚀💰

‍Understanding Payment Pricing Models

Ever wondered how those payment fees are determined? Let's break it down. A payment pricing model is essentially the blueprint for the charges associated with the transactions you handle, whether they're online or in-person. It's a complex web of interests, and let's unravel who plays a role:

1. Banks: Banks are always in the mix when it comes to payment processing. They take a cut known as the Interchange fee, which varies based on the payment method you use, on the country and on the origin of the card (domestic vs. local cards). Typically, interchange fees vary from country to country within Europe and are much higher in the United States and Canada. 
2. Card Acquirers: Then there are the card acquirers, like Visa and Mastercard. They charge a Scheme fee, and just like the interchange fee, it changes depending on the payment method.
3. Payment Processors: Finally, we have the payment processors. They provide the tech that makes payment processing possible. Their fee is called the Acquirer fee.

Now that we've got the players on the field, let's dive deeper into the two most common payment fee models. 

Blended rates

In the realm of payment pricing, the go-to model is the simple yet somewhat enigmatic Blended rates.

Here's the scoop: Blended rates wrap up all the fees into one neat package, presenting a flat rate for all transactions. While it's straightforward to grasp, the impact on your financial picture needs a closer look.

Picture this: You're in a blended rate payment pricing setup, shelling out a fixed fee (let's say 2%) for every transaction, regardless of whether it's a Visa swipe or a Mastercard tap.

Let's break down the pros and cons:

Pros

• Simplicity: Blended rates are the antidote to complexity, offering a no-nonsense fee structure that streamlines financial management for businesses.
• Predictability: That steady, unchanging rate empowers businesses to budget and project their payment processing costs with precision.

Cons

• Transparency Gap: Blended rates keep the breakdown of interchange, scheme, and acquirer fees under wraps, making it tough to spot chances for cost savings.
• Potential Overhead: Since the flat rate blankets all transactions, businesses might unnecessarily spend more on lower value transactions.

Interchange Plus rates

Ever wondered how to get the full picture of your payment processing costs? Please meet the Interchange Plus (IC+) pricing model.

Here's the deal: IC+ puts all the cards on the table, revealing the distinct components of the cost breakdown (interchange, scheme, and acquirer fees). It's like putting on a pair of clarity glasses to scrutinize your financial landscape. 

Unlike blended rates, where for any transaction you are charged a fixed rate independently of the payment method, the IC+ model allows you to break down the exact cost of the Interchange, Scheme and Acquirer fees. 

It’s also important to know that the Interchange and Scheme fees vary depending on numerous factors such as the payment method, the issuing bank or the origin of the card (local vs. international). For this reason, the IC+ model provides the most accurate depiction of your payment processing costs. 

Let's talk pros and cons:

Pros

• Crystal-Clear Transparency: IC+ lays out the nitty-gritty details of interchange, scheme, and acquirer fees, empowering businesses to spot opportunities for cost-cutting strategies.
• Optimized Costs: With a detailed understanding of the fee structure, businesses can fine-tune their cost management, ensuring efficiency and savings.
• Lower costs: Because all fees are clearly defined in the IC+ model, there are no hidden costs and you can benefit from better rates in the long run. 

Cons

• Initial Complexity: Admittedly, the IC+ model might seem a bit intricate at first glance. It demands a tad more effort to wrap your head around how each fee segment operates.

So why does Smeetz offer the Interchange Plus model?

Transparency Beyond Compare  

At Smeetz, our bond with clients thrives on transparency. Hidden costs? Nowhere to be found! With the Interchange Plus model, what you see is what you get – crystal clear and upfront.

Cost Mastery Made Easy 

Optimizing costs isn't just a buzzword here. The Interchange Plus model hands you the reins to fine-tune your expenses, ensuring your financial ship sails smoothly and profitably. 

Unbeatable rates

Thanks to its transparency, the Interchange Plus model paves the way for Smeetz to provide the most competitive rates in the market. By clearly identifying all the fees and eliminating hidden costs, we can significantly reduce payment processing fees. This is an incredible opportunity for our customers to focus on what they do best: crafting exceptional experiences!

Championing Sustainable Success  

Empowerment isn't just a catchphrase – it's our foundation. We're fueled by your growth, and that's why our cutting-edge tech is your secret weapon for sustained success. The IC+ model enriches our integrated payment infrastructure, offering you the most advantageous rates!