By Pat Ward, Vice President, ISV Sales, North American Bancard
To better understand the residuals available to an ISV from a payment processing partnership, it’s critical to know how a payment is processed and, even more importantly, to comprehend interchange costs. Interchange encompasses the basic rates set by the credit card brands and represents the cost the processor has to pay on every transaction. But the costs vary among the card brands and as well as whether cards were swiped vs. keyed vs. dipped (EMV chip) vs. a PIN debit transaction. Understanding the various rates related to how their clients most generally receive payments from customers will allow an ISV to better calculate how residuals will be impacted. Comprehending the interchange and knowing some of the more commonly used interchange rates will help ensure that “true” cost is passed on. (There are companies that will pad “interchange” before calculating residuals to their partners.)
Once the base is covered, it’s time to discuss buy rates (otherwise known as Schedule A) and revenue share. Unfortunately, the buy rates are not as simple as transaction fees and rates. Buy rates usually encompass the entire processing relationship with a merchant.