The True Cost of Payment Processing

Beyond the Headline Rate

When PSPs quote "2.9% + $0.30," that's not the whole story. Real costs include multiple components that add up.

Direct Costs

1. Transaction Fees

• Percentage fee (e.g., 2.9%)
• Fixed fee (e.g., $0.30)
• These compound: $100 transaction at 2.9% + $0.30 = $3.20 = 3.2%

2. Monthly Fees

• Account fee
• Gateway fee
• PCI compliance fee
• Statement fee
• Minimum processing fee

3. Incidental Fees

• Chargeback fees ($25-100 each)
• Refund fees (some PSPs)
• Currency conversion markup
• Batch fees
• International card surcharge

Indirect Costs

1. Declined Transactions

Not every transaction approves. Lost sales from declines are a real cost.

2. Integration and Maintenance

Developer time, ongoing maintenance, version upgrades.

3. Fraud and Chargebacks

Beyond fees: lost merchandise, time spent on disputes, reputation damage.

4. Opportunity Cost

Rolling reserves tie up capital. Settlement timing affects cash flow.

Calculating True Cost

Formula: (All fees + lost revenue from declines + fraud losses) / Total GMV

Optimization Strategies

• Negotiate rates at volume milestones
• Optimize for approval rates, not just rates
• Reduce chargebacks to avoid fees
• Consider IC++ pricing at scale
• Evaluate total cost, not headline rates

Key Takeaways

• Headline rates are just one component
• Monthly and incidental fees add up
• Indirect costs often exceed direct fees
• Calculate true cost per transaction
• Optimize the full stack, not just rates