Canada’s Credit Card Payment Evolution Through Interchange +
For years, credit cards have served as the backbone of commerce. While some continue for their replacement with mobile phones, biometric fingerprint readers or at the most extreme, RFID chips embedded in our bodies, credit
cards aren't going away just yet. Paired with the latest technology and pricing services, banking with credit cards is now easier than ever for both businesses and consumers.
- A recent study by Juniper Research determined the value of total mobile payments worldwide will have reached over half a trillion dollars by 2015: 1) 2011 - $240 billion; 2) 2015 - $670 billion.
- Canada, often considered a "test-market" for US, targeted products, continues to be a part of the rapid adoption of mobile payment services.
- 0-2.5 million growth of Canadians with banking apps on their smartphone in just over 14 months: ) 2010 - 0 banking apps; 2) 2.500.000 banking apps.
- When it comes to suing banking apps, iPhone users prove themselves to be the real early adopters: 1) Canadians using a banking app - 38%; 2) Canadian iPhone users with banking apps - 54%.
- With constant technological advancements, businesses looking to accept credit card payments are exposed to various solutions as a physical terminal or a mobile applications. Now, thanks to Payfirma, there is a way to make
accepting payments much simpler on the part of the merchant.
Interchange + pricing
- Already a cornerstone in US and foreign markets, Interchange Plus Pricing comes to Canada through Payfirma, giving merchants the most transparent and cost-effective pricing model geared to maximize profit on each transaction.
- How it works: In 2010, Canada's Ministry of Finance introduced the Code of Conduct, which requires all processors to clearly state their effective rates per card type lending greater transparency to all credit card transactions.
- Currently, when a merchant accepts credit cards... The cards go through an interchange system that tacks on costs based on: 1) Type of card (consumer, premium, business, etc).; 2) Method processed: Swiped, chip inserted or
manually entered. These fees and surcharges contribute to convoluted billing structures that can lead to frustration on the part of businesses.
- Interchange + Pricing from Payfirma eliminates all non-qualified fees and surcharges associated with premium and high-spend credit cards by: 1) Passing along hard costs paid to Visa and MasterCard; 2) Adding a small markup (the
+) to those costs to cover the risk associated with each transaction.
- In-ter-change-plus (/in-ter-cheynj-pluhs): New type of merchant pricing program that completely eliminates all non-qualified fees and surcharges associated with premium and high-spend credit cards.
- Interchange cost for processing credit card transactions paid to card issuers.
- Plus markup from acquirer to cover risk associated with credit card purchase.
- The interchange system also affixes a cost based on the type of card and method processed: 1) Interchange fees (paid to card issuer); 2) Dues (paid to card associations); 3) Assessments (paid to card associations).
- Using a $10.000 in credit card sales as an example, compare the same transaction with interchange differential (what you're most likely paying currently) vs. Payfirma's Interchange + Pricing.
- Interchange differential: 1) Qualifying Interchange - 1.74%; 2) Target rate - 1.54%-; 3) Interchange differential - 0.20%+; 4) Non-qualifying surcharge - 0.30%; 5) Interchange differential - 0.20%; 6) Subtotal - 0.50%;
7) Merchant discount rate - 1.80%; 8) Non-qualifying surcharge - 0.30%+; 9) Intercharge differential - 0.20%+; 10) Total cost to merchant - 2.30%; 11) Cost on $10.000 volume - $230.
- Interchange +: 1) Qualifying Interchange - 1.74%; 2) "Plus" - 0.30+; 3) Total cost to merchant - 2.04%; 4) Cost on $10.000 volume - $204.
- Using Interchange + contributes a 12% savings over Interchange differential. For the majority of businesses, switching to Payfirma's Interchange + pricing model results in significant savings. Other benefits include: 1) Low
processing costs normally reserved for large billion-dollar merchants; 2) No more surcharges based on card type (biggest benefit to SMB market); 3) Easy to read monthly statements with clear and concise rates; 4) Complete
transparency in order to understand and manage costs properly; 5) Profit maximization on each swipe.
Payfirma | Credit cards are here to stay. With Interchange + Pricing from Payfirma, accepting the most common form of payment doesn't have to be a hassle | Payfirma is Canada's true a;;-inclusive payment processor, providing
its partners with innovative and best-in-class financial technology. Visit Payforma.com for more information on Interchange prcing and other payment solutions | Sources: The Business Journals; Canadian Bankers Association;
Canadian Wireless Telecommunications Association; Juniper Research; PayPal Canada; Solutions Research Group.