To be clear: the interchange fees (~2.7%) paid by the merchants are the cost that is always there and completely covers the kickbacks to the consumer. The other things are certainly money makers, but they may or may not be negligible depending on the card and the consumer.
Interchange fees dont go directly to bank providing the card afaik. Visa/Mastercard network take a cut, I recall reading 0.25% on CC in Europe? Then the merchant bank takes a cut (merchant services and shouldering last man standing chargeback/fraud risks - hence why sometimes merchants pay 4%+) and then hmm anyone else?? I doubt any more than 1% is remitted to the bank providing the card given I know some physical retailer (small) paying ~1.4% in UK.
In the UK they also market you for $. They ain't sending you that exclusive "loyal VIP customer" introduction/bonus offer for virgin wine, or some fitness club, or breakdown out the goodness of their heart..Which is probably another nice earner on top of everything else
Very few merchants pay that, notice how there are dozens of segmentations on that page? They have general retail and general e-commerce, your business will slot into one of those two categories worst case. If your merchant processor doesn't put you in one of those two, they are not the sharpest tool in the shed.
Most of the stores I work with average around 0.83% to 0.85% of credit card/debit card volume going to transaction fees, with processor pricing hovering between $0.10 a trans and 10 basis points to 25 basis points.
This is not what I've heard from the handful of store owners I've spoken with. Do you know if data about industry-wide averages rather than the folks you work with?
> This is not what I've heard from the handful of store owners I've spoken with.
Are you well versed in interchange? Have you seen there merchant processing statement? What was their average ticket, Visa/MC/Amex/DC breakdown, total volume, and pricing (basis points, trans fee, plus hidden fees)?
If your a restaurant, you are going to take many more premium cards. My example is from grocery, where debit cards are common, and the retailers are extremely aggressive and sue companies like Visa on a quarterly basis.
>Do you know if data about industry-wide averages rather than the folks you work with?
Lololololol, that is a good one! No, this is an extremely fractured industry with literally hundreds of players, operating using pyramid scheme brainwashing tactics, and in ACN's and CDS's cases, as actual pyramid schemes (the latter pushed via a church).
Industry players don't share, and there are contracts & regulations preventing First Data, Tsys & Elavon from aggregating and distributing that type of info about their ISOs portfolios. Akin to the firewall in Investment Banking between analysts and bankers, it isn't about to come tumbling down.
What I can tell you is running a bit below 1% cost is fairly common in the supermarket vertical. Restaurants and other retail trend higher, due to their poor lobbying power, but still you should be well within 2.5% if not 2% if your clientèle aren't all exclusively using top tier cards and you aren't processing through some racket like Card Data Services where your fellow parishioner sold you payment processing that is 150 basis points over interchange.
Right, so "Most of the stores I work with average around 0.83% to 0.85%" is not very representative. I'm pretty happy with my initial characterization, whose roughness I emphasized with a tilde. Thank you for the interesting comments about the industry.
Same way banks make money off the rest of it's cardholders.