When Done Automatically, Interchange Optimization Can Help Merchants Save Big on Processing Fees


With the rise of B2B eCommerce solutions and mobile POS systems such as Clover, customers now expect the freedom to use their credit cards literally anywhere and at any time. While this freedom can encourage more impulse buying from your customers, it also puts you on the hook for increased credit card processing fees resulting from increased credit card transactions.

And as a result your fees are definitely going up.

If your ever-increasing credit card transactions are taking an ever-increasing chunk out of your profits, you’ll be pleased to learn that you do have options for lowering your payment processing costs easily, securely, and automatically.

Let’s talk about how you can increase your profits using interchange optimization from VelocIT.

First Off, What Is Interchange?

To understand interchange optimization, you first need to understand interchange.

Interchange is the cost you pay to run credit cards at your company. Those interchange fees, are non-negotiable and are paid to the card-issuing banks, such as Chase, Citi, or Capital One. Your processor doesn’t take a cut out of your interchange fees.

(By the way, this is why Citi and the others offer you reward cards. The more you use your card to get points or cash back, the more money they make off of interchange fees. It all makes sense now, doesn’t it?)

There are various fees including interchange that come into play to determine your rate on each transaction, and some are based on how the card was presented. Level 2 & 3 requires additional data be collected that takes a number of factors into account. Transaction size, payment acceptance environment, merchant industry, and card type are just some of the many considerations that make up interchange cost structures.

Since there’s so much variability in interchange rate calculation, your best bet as a merchant is to try to qualify each transaction for the lowest rate possible. That way, you’ll have the opportunity to pay the minimum in fees.

This is where interchange optimization comes in.

What Is Interchange Optimization?

Interchange optimization is a system in which a business processes a credit card payment correctly, with all of the data required by the issuer, in order to qualify for the least expensive interchange rate possible.

In other words, to achieve optimal (i.e. lowest) interchange rates, the merchant (you!) must send as much data as possible to the card issuer. This is because, as a general rule, your interchange fees will be higher when the card issuer determines that your transaction has a higher risk of fraud. To the card issuer, more data results in less risk. Therefore, the “trick” to qualifying for lower rates as a merchant is to:

  • Determine what data the card issuer wants from you
  • Give them that data

Sounds pretty simple… but, since we’re talking about credit card companies here, you can bet it isn’t simple. Not even a little bit.

The “Science” of Lowering Interchange Rates with BINs

Credit card transactions are all machine based and, as we all know, machines love numbers. BINs are the numbers that power credit card transactions.

BINs (“Bank Identification Numbers”), also sometimes referred to as IINs (“Issuer Identification Numbers”), are the first 6 digits of a credit card.

These 6 digits identify:

  • The card’s network (Visa, Mastercard, American Express, Discover, etc.)
  • The name of the issuing bank (Citi, Chase, Capital One, etc.)
  • The card type (debit, credit, prepaid, etc.) and whether it requires a PIN
  • The card class (purchasing card, charge card, business card, consumer card, corporate card, etc.)
  • A lot more (regulatory status, the issuing bank’s geolocation, etc.)

Since BINs deliver so much data to the merchant, a savvy merchant can use BINs to deliver the right kind of data back to the issuing banks in order to optimize their interchange rates.

Extra-savvy merchants choose payment solutions that will automatically and instantly analyze BINs, extract the right data from the transaction, and deliver that data back to the card issuer – all so the merchant can lower their interchange rates effortlessly.

That process is called interchange optimization, and it’s only available with the right advanced payment solution company.

VelocIT Makes Interchange Optimization Automatic

The opportunity for lower interchange rates is only one of many reasons merchants choose VelocIT.

In addition, VelocIT customers can:

  • Get paid faster with next-day (12 hour) funding
  • Flexibly invoice clients using web portal- or email-based “Pay Now” buttons
  • Reduce liability with secure technologies including tokenization, Bolt P2PE, and EMV terminals

Plus, since VelocIT offers free terminals, free installations, free support, more than 400 extended solutions for Sage 100cloud and an Acumatica-certified app, a responsive in-house development team, and new features that we release (for free!) every few months, there’s a lot to gain by switching to payment processing from VelocIT.


Contact VelocIT, so you can find out how easy it can be to significantly lower your overall processing rates using interchange optimization.


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