Choosing the right pricing model can significantly impact your business margins, especially as your transaction volumes grow. Here’s a breakdown of two common models, Blended and IC++, to help you better understand your options.
Blended Pricing
The blended pricing model is one of the most common and familiar approaches to payment processing. It is often preferred by smaller businesses because of its simplicity: a single percentage rate is applied across most transactions, regardless of the card type or issuing bank. This protects them from fluctuations in underlying costs, as the processor absorbs the risk of certain transactions being more expensive.
However, this simplicity can come at a cost. Blended pricing conceals the true cost of each transaction, making it difficult to identify where you might optimise payment acceptance. For example, you may miss opportunities to promote lower-cost payment methods or digital wallets, which could be cheaper than your current rate. Over time, this can lead to higher overall processing costs, especially as your transaction volume or card mix changes.
Interchange Plus Plus (IC++)
In contrast, the IC++ model sits at the other end of the spectrum. It passes through the actual interchange fees, scheme fees and the processor’s fixed margin, giving merchants a full breakdown of what they’re paying and why. This level of transparency helps businesses identify cost-saving opportunities and negotiate better rates or introduce alternative payment methods.
In general, this model is commonly used by mid to large-sized enterprises or high-volume businesses due to its fairer and more transparent pricing structure, which provides a more accurate and granular view of their payment costs.
The trade-off is that the IC++ model is more complex to understand, may be harder to reconcile and can expose businesses to cost fluctuations when underlying scheme and interchange fees change. It is also not always available to smaller businesses, particularly those without negotiating power.
Why it Matters
Network costs are just one part of the payments puzzle, but they can make a big difference to a business’s bottom line. Whether you are using flat-rate pricing or looking to optimise with an IC++ model, having clarity on how these fees work can help you make better decisions for your business.
At Oligo, we simplify payment acceptance and help businesses make sense of their fee structures. If you would like support reviewing your current setup or identifying opportunities to reduce unnecessary costs, we are here to support you.
Disclaimer
This article is provided for informational purposes only and does not constitute legal, employment, tax or professional advice. You should seek advice from a qualified professional that is specific to your business circumstances before making any decisions.