Pricing
Blended Rate
Definition
Blended Rate a pricing model where the acquirer charges a single flat percentage for all transactions regardless of card type or interchange category. Simple to understand but often more expensive than IC++ for merchants with diverse card mixes. The acquirer calculates an average rate and takes margin on the spread between actual interchange and the blended rate charged. Common with PayFacs and mainstream PSPs targeting smaller merchants.
Related Terms
Interchange Plus Plus (IC++)
The most transparent pricing model in payments, breaking costs into three components: actual interchange (paid to issuer), scheme fees (paid to card networks), and acquirer markup (the processor's profit). Merchants see exactly what each transaction costs and can optimize accordingly. IC++ typically benefits larger merchants ($100K+/month) with diverse card mixes and becomes available at higher volumes.
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.
Payment Facilitator (PayFac)
A payment model where a master merchant (the PayFac) aggregates sub-merchants under its own merchant account. PayFacs like Stripe, Square, and PayPal perform underwriting, onboarding, and risk management on behalf of their acquirers. This enables fast merchant onboarding but means sub-merchants don't have their own MIDs. PayFac model works well for smaller merchants but creates single-point-of-failure risk.
See Also
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