I was reviewing a processing statement for a merchant recently and noticed something strange. This merchant was on wholesale / interchange pass through pricing, so the wholesale costs were listed.

With this type of pricing, the merchant is supposed to pay the wholesale costs plus a fixed markup.

The wholesale rate listed for the category was much higher than it should have been.

How did I know?

The interchange wholesale rates are published and available online. After 13 years in the payment processing industry, I have a general idea of what the wholesale rates are.

To make sure, I went online to double check. Sure enough, the published rate was much lower that the rate on the merchant statement.

This merchant had provided me with three recent statements, and three from several years ago. The recent one had a number in parentheses next to the wholesale rate. The older statements did not.

Since I had never seen this before, I went to my private Facebook group of merchant professionals and posted what I was seeing.


Notice $714.20 VS Purchasing Card CNP

With a Fee of $19.48 = 2.73%

Notice $8,686.09 VS Purchasing Card CNP

With a Fee of $352.18 = 4.05%

The (13) added 130 Basis Points!

I received replies right away. It’s a new dirty trick called interchange padding that some processors are using. The number in parentheses is equivalent to the number of basis points begin added to the wholesale cost. This is above the agreed upon markup that was already established when the merchant opened their account.

I’ve seen some shady pricing in this industry but honestly, I was surprised.

This was not a small unknown processor. I’m not going to name them, but they’re a major player.

I went back to my statements to decode the numbers. Sure enough, each category was being padded. I was excited to tell the merchant what I had discovered. Of course they were also surprised and ended up switching to us.

Now that you have seen this, I have an honest question – would you have noticed this? I’m not suggesting that you’re incompetent, but I know you’re busy. This increase happened over a period of three years.

Unfortunately, it happens all the time with many different merchant service companies. If you haven’t had someone review your statement with you then we should talk soon!