Merchant statement basics
Interchange Versus Processor Markup
Understanding the difference between underlying card costs and processor-controlled pricing is essential to evaluating a merchant statement fairly.
A card transaction involves more than the merchant and processor.
The payment chain can include the merchant, acquirer, processor, card network, and card-issuing bank. Different participants perform different jobs and receive different parts of the overall economics.
The FTC describes the merchant discount as the amount deducted from transaction value, including interchange and other processing fees. Mastercard similarly explains that interchange is one component of the merchant discount rate established by acquirers.
Interchange is not the same thing as processor profit.
Interchange commonly flows through the payment system in connection with the issuing bank and the characteristics of a transaction. Card type, merchant category, how the card is accepted, timing, data submitted, and other criteria can affect the category that applies.
A processor may pass those costs through, bundle them into another pricing format, or describe them in a way that is difficult to follow. The label on the statement does not always reveal where the margin sits.
Processor markup is the commercial layer.
Markup and certain account fees compensate the processor and related service providers. That layer is where account-specific commercial negotiation may be possible. The opportunity varies by merchant, contract, risk, service mix, volume, and current pricing.
This is why one advertised percentage cannot tell a business owner whether the overall account is fairly priced.
The purpose of a professional review is separation.
SPA’s role is to distinguish legitimate underlying costs from processor-controlled pricing and unnecessary charges. If the total arrangement is fair, SPA says so. If it is not, the business owner can authorize SPA to pursue better terms with the current processor.