Business owners often see a single rate on their payment processing statements and assume that number represents the full cost of accepting a card. According to William Stapleton, President and CEO of Iron Rock Payments, that assumption can lead to costly mistakes. Stapleton, who previously founded the payment processing company PayFacto and sold it to Visa in 2019, says the confusion is not accidental but a structural feature of how pricing is presented.
"Most merchants are shown a rate, not a structure," Stapleton said. "A rate tells you almost nothing until you know what it's built from." A typical card transaction fee, he explains, is composed of three separate pieces, each set by a different party. The first is the interchange fee, which goes to the bank that issued the customer's card and is set by the card networks themselves. It is not something a processor negotiates on a merchant's behalf and does not change based on which processor the merchant chooses. The second is the assessment fee, which goes to the card network, whether Visa, Mastercard, or another network. Like interchange, this fee is fixed and applies no matter which processor a business uses. The third piece is the markup, which is set by the processor and is the only part of the fee that is actually negotiable.
"Interchange and assessments are the cost of the rails," Stapleton said. "The markup is the only line item that reflects the processor you picked." This distinction matters because most of the confusion Stapleton sees from business owners comes from treating the total fee as one negotiable number, when only a fraction of it can move. "If a business owner doesn't know which part of the number is fixed and which part is negotiable, they can't actually tell if they're getting a good deal," he said. "They're just comparing two totals without knowing what's inside either one."
The implication for businesses is significant. Two processors can quote very different headline rates while charging similar effective totals, or the reverse. A lower quoted rate built on a higher markup can cost more than a higher quoted rate with a thinner one, depending on how a business actually processes its cards. This means that comparing only the advertised rate can lead a business to choose a more expensive provider without realizing it.
Stapleton's approach with Iron Rock Payments starts with getting a business owner to separate the fixed costs from the markup before comparing anything else. He suggests business owners ask a provider to show interchange and assessment costs separately from the markup, rather than accepting one blended rate. He also suggests asking how the markup is applied, since some providers apply it as a flat percentage and others build in per-transaction fees that behave differently depending on transaction size. "A business that runs a lot of small transactions is affected very differently by a per-transaction fee than a business that runs fewer, larger ones," he said. "The right structure depends on how the business actually processes, not on which number looks smallest on a sales sheet."
Stapleton said the goal of laying this out is not to make every merchant an expert in interchange schedules but to give business owners a way to ask better questions before they sign anything. "You don't need to memorize the card network rules," he said. "You just need to know that not everything on your statement is negotiable, and the part that is negotiable is the part worth actually comparing." Iron Rock Payments works with business owners on that comparison directly, walking through statements line by line so the fixed costs and the markup are separated before any decision gets made.
