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First
Annapolis, a management consulting and financial advisory services firm
focusing on the payments industry, recently completed a review of credit
card acceptance pricing for Internet retailers using payment gateways. The
survey included more than 30 gateway companies, banks, and merchant
acquirers that publish credit card acceptance fees on their Web sites. The
survey found that Internet retailers would commonly be subject to the fees
indicated in the table below. What
this means is that based on these fees, a merchant with a $75 average
ticket could expect to pay an effective discount rate (discount rate plus
per transaction fees) of 3.12%. While relatively high, the charges
revealed in the survey were less than expected and can partially be
explained by the higher interchange rates for card not present
transactions (approximately 40 basis points higher than for card present
transactions). Virtual merchants as a group also present more risk to
acquirers than their physical counterparts. Additionally, the
non-transaction fees paid by virtual merchants ($1,497 in the first year)
are somewhat analogous to the application, terminal, and other fees
physical merchants pay (approximately $500 to $700 in the first year). The
survey was based on advertised pricing so actual discount rates will vary
depending on sales volume and average ticket size. Small merchants should
expect to pay higher rates, and the survey found one site posting a
discount rate of over 6% for an average ticket of less than $10.
Additionally, many providers charged monthly discount minimums of about
$25. For
additional information contact Paul Grill of First Annapolis Consulting at
grillp@1st-annapolis.com.
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