?On Us vs Off Us Transactions

The payment ecosystem is a complex web of stakeholders involved in every transaction. In this ecosystem, the roles of the acquirer, PSP, issuer, and processor are converging to create a streamlined proposition to the benefits of merchants. One of the critical components of any payment transaction is the interchange fee, which is the cost associated with every transaction. In this article, we will delve into the importance of On Us vs Off Us transactions and why they matter in the payment ecosystem.

Card Interchange:

To understand the difference between On Us vs Off Us transactions, we first need to understand card interchange fees. The interchange fee is the cost that the card issuer pays to the acquirer for processing a transaction. The fee is then shared across different stakeholders involved in the transaction, depending on their role. These stakeholders include the issuer, acquirer, PSP, and processor.

Pricing Models:

Acquirers use different pricing models depending on the size of the retailer and transaction volume. The three most common pricing models are flat pricing, blended pricing, and Interchange Plus Plus. Flat pricing is typically used for small retailers and includes a static monthly fee with an additional percentage and/or fixed fee charged above the agreed threshold. Blended pricing is expressed as a fee per card brand and can consist of a basic fee and additional fees levied in certain scenarios. Interchange Plus Plus is used for large merchants and is a fully transparent model that expresses the acquirer markup, the schemes, and the issuing bank fees individually.

On Us vs Off Us Transactions:

The difference between On Us vs Off Us transactions lies in the issuing bank and acquiring bank's relationship. In an On Us transaction, the issuing bank and acquiring bank are the same entity. This allows them to profit the most from the transaction and offer pricing at discounted levels from the interchange rates. In contrast, an Off Us transaction is where the issuing bank and acquiring bank are different entities. In this scenario, the interchange fee is shared between the two banks, reducing the profits for both entities.

Conclusion:

On Us transactions are increasingly becoming a core area of focus in the payment ecosystem. Acquirers who assume these dual roles can offer competitive pricing to merchants who commit large processing volumes. However, it's important to note that not all card schemes publish their interchange rates. As such, On/Off flows may not always highlight the interchange rates across different card schemes. Understanding the difference between On Us vs Off Us transactions is critical to navigating the payment ecosystem and creating a streamlined proposition to the benefits of merchants.