Pricing
Basis Points
Definition
Basis Points a unit of measurement for percentages, where 1 basis point equals 0.01%. Used extensively in payments pricing discussions. 100 basis points = 1%. When negotiating rates, a reduction from 2.9% to 2.7% represents 20 basis points. Useful for discussing small but meaningful rate differences on high-volume accounts.
Related Terms
Merchant Discount Rate
The total percentage fee a merchant pays for accepting card payments, encompassing interchange, scheme fees, and acquirer markup. Often shortened to MDR. In blended pricing models, this is presented as a single rate (e.g., 2.9%). In IC++ pricing, the components are itemized separately. MDR varies significantly by merchant risk profile, volume, and negotiating power.
Interchange Fee
The fee paid by the acquiring bank to the issuing bank each time a card transaction is processed. Set by card networks (Visa, Mastercard), interchange varies based on card type (debit vs credit, rewards vs standard), merchant category code, transaction type (card-present vs card-not-present), and geography. Interchange typically represents the largest component of payment processing costs, ranging from 0.2% for regulated debit to 2%+ for premium rewards cards.
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