03 Interchange Pricing Grids Presentation Feb 2012

Interchange, Pricing
Options and Grids

Omaha Retail ISO Training
First Data Learning Organization
Copyright 2011 | First Data Corporation
Developer: HMM/AM| Rev: 02/06//2012
Objectives
This presentation will prepare you to:
Demonstrate knowledge of the basic knowledge of Interchange.
Identify the Pricing Options supported by the Omaha backend.
Identify the benefits and features of American Express One Point and
Discover Full Acquiring card types.
Identify the purpose of the authorization income grid, user defined
monthly reoccurring grid, merchant pricing and tiered pricing grids.
Interchange
Interchange Overview
Visa, MasterCard and Discover have over 500 different
interchange programs. Each program provides a specific set of
criteria and requirements for qualification.
Some of the general elements that produce the qualification include:
Type of card (Visa, MasterCard, Discover, Debit, Reward, T & E,

Corporate)
Merchant Classification (Face-to-Face, Mail Order, Internet, B2B)
Type of point of sale entry (Swiped, keyed)
Variety of specific requirements (see next slide)
Most common merchant industry types are:

Retail
Supermarket
Hotel
B2B
Restaurant
Petroleum
MOTO
Internet
Interchange Puzzle Pieces

Interchange:
The fee paid by the acquirer (merchant client) to the issuer of the credit
card (cardholder bank) to compensate the issuer for their risk in
accepting, carrying, and collecting cardholder charges.
Dues & Assessments:
The fee paid by the acquirer (merchant client) to the Association.
This fee is a set rate applied to the volume of transaction and is not
contingent upon the type of merchant or how the transaction is presented.
Discover = 0.10%
MasterCard = 0.110% for Signature Debit Cards, Consumer and Corporate Cards under
$1000.00
MasterCard = 0.120% Consumer and Corporate Cards over $1000.00 (Effective January 2012
this amount will increase to 0.130%
Visa = 0.110%
Interchange Puzzle Pieces, contd

Discount:
The percentage fee assessed to the merchant by the client in attempt to recoup
the cost the client paid in Interchange and Dues and Assessments.
Interchange + Dues and Assessments + Base Discount +
Surcharge Discount < Discount Charge to Merchant
Definition of Base Discount / Surcharge Discount /

Downgrade:
Base Discount: Fee calculated by applying a fixed percentage to the dollar
amount of the gross bankcard sales dollar volume.
Surcharge Discount: Fee calculated by applying a fixed percentage to the
dollar amount of the downgraded bankcard sale dollar volume.
Downgrade: When a transaction clears at a more expensive interchange
program than what is set on their account as their baseline.
What is a Fee Class?

Fee Classes
A three-digit number identifying a VS, MC, DSCV interchange
program. Each merchant will be assigned a fee class per card type
for their industry type based on where they should qualify the
majority of the time (this is their baseline).
Common Fee Class Assignments:

Retail Merchants:
Visa Credit CPS Retail 007 and Visa Debit CPS Retail Debit 101
MasterCard Credit Merit III 012 and MasterCard Debit Merit III Debit 078
Discover Credit PSL Retail 112 and Discover Debit PSL Retail Debit 113
What is a Fee Class? contd

MOTO Merchants:
Visa Credit CPS MPITN 011 and Visa Debit CPS CNPDB 107
MasterCard Credit Merit I 001 and MasterCard Debit Merit I Debit 076
Discover Credit PSL CNP 120 and Discover Debit PSL CNP/Ecomm Debit 121
Restaurant Merchants:
Visa Credit CPS Restr Credit 099 and Visa Debit CPS Restr Debit 132
MasterCard Credit Merit III 012 and MasterCard Debit Merit III Debit 078
Discover Credit PSL Restr 114 and Discover Debit PSL PSL Restr Debit 115
What is a MCC/SIC Code?

MCC (SIC) Codes:
MCC - Merchant Category Code
SIC Standard Industrial Classification
MCC/SIC codes are 4-digit numbers used to classify the
merchant's business by the type of goods or services provided.
Specific codes can qualify for unique interchange programs
exclusive to their industry that normally have lower rates.
Ex: Small ticket restaurant, Supermarket, utility, Quick Service Restaurant, Business
2 Business
To locate a full list of all MCC/SIC universal codes, access:

My Sales Office > Training > MCC Guide.
Durbin - Regulated vs. Unregulated

New Durbin Legislation changes how debit transactions are handled from an
interchange perspective beginning September 30, 2011. Under the Durbin
Amendment, debit transactions are split into two categories: Regulated and
Unregulated.
Regulated Any signature or pin based debit transaction that is processed on a card that is issued
by an Issuing Bank with over 10 billion dollars in assets will be considered a regulated transaction
and will be eligible for a lower interchange rate:
.05% (basis points) + .21 (per item) + .01 Fraud Prevention
Unregulated- Signature or pin based debit transactions that are processed on a card that was
issued by an Issuing bank with assets less then 10 Billion in assets will be subject to the debit
interchange rates that exist today.
This change will significantly impact the profit margin experienced by ISOs on
regulated debit transactions and may lead to the need for you to analyze debit
pricing in order to reduce attrition within your portfolio.
The next slide offers insight on cost differential between transactions that are
classified as Regulated vs. Unregulated within various industries.
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Durbin-Regulated vs. Unregulated Illustration

Here are some examples Regulated versus Unregulated:
Retail Signature Debit Scenario: $100 transaction

Regulated 05% (basis points) + .21 (per item) + .01 Fraud Prevention = $0.27
Unregulated 1.15% + $0.15 = $1.30
Regulated Pin Debit Scenario Start: $100 transaction
Regulated 05% (basis points) + .21 (per item) + .01 Fraud Prevention =$0.27
Unregulated 80% (basis points) + 17 (per item) + .0325 switch fee + .01 addl
fees=$1.0125
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Omaha Backend Pricing Options

No matter which option used youll always have Interchange,
Dues and Assessments, and FD contractual costs to account
for.
Pricing Options
Tiered Pricing
Buckets 1, 2, 3
Expanded 4, 5, 6, 7, 8
Regulated 1, 2, 3, 9
Expanded Regulated 1-9
Most difficult to maintain
Enhanced Recover Reduced

(ERR)
Also called Billback (EBB)
Explanation
Applying discount rates to be assessed depending on where the
transaction qualifies at:
Qualified
Mid Qualified
Non Qualified
Up to Tier 9 > Expanded to include Visa Rewards, MasterCard
World, and Regulated Debit programs
Applying a qualified discount rate to all transactions as well as a

surcharge rate to be assessed only on all of the non qualified
transaction volume.
Pass Thru Pricing

Also called Interchange Plus
Pricing
Taking the interchange and dues and assessments cost assessed to

the client and passing that cost on to the merchant.
Bundle Pricing
A flat rate pricing structure that allows separate rates for regulated vs
unregulated cards. Can be used in conjunction with ERR pricing.
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Tiered Pricing
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Tiered Pricing
Tiered discount pricing allows you to group interchange programs into
different tiers buckets and then price those buckets separately based
on the range of interchange costs grouped into each buckets.
With tiered discount pricing (Q, M, N) you have the option to set a price
per discount category.
(**Recall that the discount rates you assess must cover interchange,
dues and assessments, First Data discount (contractual) costs as well
as your profit margin.)
Example Buckets and Discount Pricing:

Qualified
ex: 1.75%
Mid Qualified
ex: 2.45%
Non-Qualified
ex: 3.10%
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Tiered Pricing, contd

Ultimately your goal in assigning discount percentages is to
create an average to cover the spread between the lowest and
highest interchange rates within each discount tier, making
sure you are gaining a profit margin no matter where the
merchants transaction qualifies.
You have the ability to price MasterCard, Visa and Discover
separately as well as Credit and Debit separately.
This is often times referred to as split pricing.
| 15
Qualification Buckets-Three Tiered

Tiered pricing groups interchange plans into qualification
buckets and then applies discount rates by bucket.
Qualified
Rate 1
Mid-Qualified
Rate 2
Non-Qualified
Rate 3
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Qualification Buckets-Three Tiered + Regulated
Qualified
Rate 1
Regulated
Mid-Qualified Non-Qualified
Rate 9 on MPG Grid
Rate
3
Rate 2
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Qualification Buckets-Expanded Tiered
Qualified
Rate 1
Mid-Qualified
Rate 2
Non-Qualified
Rate 3
Rewards 1
Rate 4 on MPG
Grid
Rewards 2
World Card Qual World Card Mid-Qual World Card Non-Qual
Rate 5 on MPG Grid Rate 6 on MPG Grid Rate 7 on MPG Grid
Rate 8 on MPG Grid
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Qualification Buckets-Expanded + Regulated
Qualified
Rate 1
Mid-Qualified
Rate 2
World Card Qual

Rate 6 on MPG Grid
Rewards 1
Non-Qualified
Rate 4 on MPG Grid
Rate 3
World Card Mid-Qual

Rate 7 on MPG Grid
World Card Non-Qual

Rate 8 on MPG Grid
Rewards 2
Rate 5 on MPG Grid
Regulated
Rate 9 on MPG Grid
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Merchant Statement
Summary of Card Fees Section
MasterCard/Visa/Discover Full Acquiring Qualification of transactions will
be listed by the qualification (Qualified/Mid Qualified/Non Qualified) total
dollar volume of transactions for each bucket, the rate for that bucket & total
fee for that bucket.
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Tiered Pricing
Pros
Cons
Relatively simple pricing.

Fewer possible discount
rates to explain.
Easier for merchants to
reconcile.
Typically higher margins
on downgrades.
Low merchant visibility

regarding downgrade
reasons.
Challenges with
specialized interchange
programs (i.e., Rewards).
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Enhanced Recover
Reduced (ERR)
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Pricing Enhance Recover Reduce (ERR)

Recover Reduced allows you to charge the merchant for Nonqualifying
interchange fees. Nonqualifying interchange fees are the difference between the
qualifying fees for the merchants current interchange fee reduction program and
the actual fees. The system assesses the merchant the difference for the
Nonqualifying interchange.
The Recover reduced Fees program is controlled by the Interchange

Fee Flag transaction on the Card Type screen. The system used the
merchants fee class for the baseline in the calculation to recover the
difference in interchange fees.
The system uses the merchants fee class to determine the baseline
for the calculation of recovered fees for your recover reduced fees
merchants. You must set the fee class field correctly on the
merchants account to ensure the system applies the correct
baseline. The system does not automatically rebate merchants for
fee differences.
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Pricing Enhance Recover Reduce (ERR)

Pass Non-qualifying Interchange costs to merchants.
Using Enhance Recover Reduced, you have the option to assess a
surcharge to the merchants downgraded sales volume.
The surcharge is a client defined percentage that is applied to the
downgraded sales volume of participating merchants.
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ERR Example
In this Enhanced Recover Reduced scenario, the merchant pays the Discount Fee ($1.70) the
difference in interchange ($.76) plus the ERR Surcharge ($1.50). Note: Ensure you are covering for
dues and assessments costs.
Totaling a fee of $3.96 whereas Interchange Cost was $2.40.
Merchant Fee Class
= 007 CPS Retail (1.54% + .10)
Transaction Amount
= $100.00
Discount Fee
= 1.70%
ERR Surcharge
= 1.50%
Transaction 1 Qualifies @ 007 CPS Retail ( 1.54% +.10)

Discount Charge
= $1.70
Actual Interchange
= $1.64
Net Profit
= $.06
Transaction 2 Qualifies @ 055, EIRF (2.30% + .10)

Discount Charge
= $1.70
Potential Interchange = $1.64

Actual Interchange
= $2.40
Difference
= $0.76
ERR Surcharge 1.5% = $1.50
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ERR Benefits
Merchant only sees one percentage rate on their Statement:
The Qualified % is presented with the volume and the total discount fee
The Difference in Interchange and the Surcharge are combined on one single
line item labeled Non Qualifying Fees
Protection from competitors analyzing your merchants

statements. There is no way to back in to the surcharge
amount.
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Merchant Statement
MasterCard/Visa/Discover Full Acquiring Qualified transactions will be displayed
as Discount 1 (6), with the rate & total fee.
*Note this is the flat rate fee the merchant is assessed for all transactions
regardless of qualification.
Non-qualified (downgrade) transactions will be displayed as Non-Qualified Fees
with only the fee.
*Note this line is made-up of the difference in interchange & the ERR%
(surcharge).
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ERR Pros and Cons

Pros
Cons
Built-in interchange
expense insulation.
Challenging to explain.
Difficult to reconcile.
Can maintain higher

margins on downgraded
transactions using the
enhancement (surcharge).
Visibility to downgrade
reasons.
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Pass-through Pricing Plus

(Credit / Signature Debit)
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Pass-Through Interchange Pricing

Using interchange pass through allows the expenses
associated with interchange fees and dues and assessments to
be billed directly to the merchant.
If you are using Interchange Pass Through Plus, a sale
transaction fee and/or a percentage rate would be assessed
against the monthly volume and would be billed to the
merchant along with the dues and assessments and
interchange fees.
Note: Pass-through Interchange pricing does not cover any

First Data contractual pricing.
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Pass-Thru Interchange, contd

How do you make money and recoup your FDR contractual
costs?
Pass Through Interchange Plus offers the ability of
charging MasterCard, Visa and Discover Interchange rate
in addition to dues and assessments plus:
A sales Transaction Fee
And/Or.
A percentage rate against the monthly volumes

(either on net or gross volume).
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Merchant Statement
Interchange Print Option = 1
MasterCard/Visa/Discover Full Acquiring Qualification of
transactions will be in a summary with a line item of interchange
with the total fee paid.
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Merchant Statement
Interchange Print Option = 2
Summary of Interchange Fees Section
MasterCard/Visa/Discover Full Acquiring Qualification of transactions will
be listed by the interchange program name & rate with the count of
transactions, total dollar volume of transactions & total fee for that program.
| 33
Pros and Cons: Pass-thru Pricing

Cons
Pros
Transparent pricing
system.
Typically lower, fixed

margins.
Easy to identify cleared

interchange
plans/downgrades.
Challenging to explain.
Preferred pricing structure

of larger, more
sophisticated businesses.
Difficult to reconcile.
Difficult to justify
ISO/processor-initiated
rate increases.
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Pass-through Pricing (PINDebit)
| 35
Pass-thru PIN Debit

Allows you to pass through PIN debit network fees to the
merchant.
In addition to passing the network fees to the merchant you
can bill a(n):
per item charge
percent on the volume
monthly flat rate debit access fee
| 36
Merchant Statement
Each PIN debit network will have its own line item with a description of
Online Debit Fees with the rate & the total fee.
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Bundled Pricing
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Bundled Pricing
Bundled pricing is a flat rate pricing structure that allows clients to price
regulated debit cards with a discount rate that is different than the
unregulated cards, or they can be priced at the same combined rate.
4 options to choose from:
Pin Only
Signature debit only
Pin and signature debit only

Pin debit, signature debit, and credit
This pricing model cannot be used with tiered or pass through pricing
with those card types selected, but can be combined with ERR pricing.
| 39
Regulatory Product Bundle - Flexible Price

Bundle Options:
Bundle Pricing
(Statement Bundle)
Option
Tiered Pricing
Method
Recover Reduced
Enhanced (ERR)
Pricing Method
1 PIN Debit Only
Available for Credit &

Signature Debit
Signature Debit.
2 PIN Debit &
Available for Credit only Available for Credit and
Signature Debit
Unregulated
Signature Debit. Note Regulated Debit will
not downgrade or
Surcharge
3 Signature Debit
Available for Credit only Available for Credit and
Only
Unregulated
not downgrade or
Surcharge
4 PIN Debit, Signature Not available.
Available for Credit and
Debit & Credit
Unregulated
not downgrade or
Surcharge
Interchange Pass
Through / Cost Plus
Pricing Method
Pass Through PIN

Debit Network Fees

Not available.
Signature Debit.
Available for Credit only Not available.
Available for Credit only Available
Not available.
Not available.
| 40
Bundled Pricing, cont.

NOTE All Flexible Bundle Price Options are set at the MERCHANT LEVEL.
You do not choose one option and apply that to your entire portfolio
Option 1 PIN Debit Only
Option 2 PIN Debit and Signature Debit
Option 3 - Signature Debit Only
Option 4 Signature Debit, PIN Debit and Credit
| 41
Bundle Option 1 PIN Debit Only

Use this option for merchants that are most sensitive to PIN Debit
transaction costs.
This pricing option allows you to continue to price Credit and Signature
Debit transactions in your usual fashion including; Tiered pricing, ERR or
Pass through.
When you choose Bundled Option 1 for PIN Debit transactions only you can:
Offer merchants a single Bundled rate for all PIN Debit transactions
and/or fixed Per Item charge per transaction.
Alternatively you may choose to offer:
Separate pricing for Regulated and Unregulated PIN Debit
transactions
And you may also charge a different Per item charge for Regulated
and Unregulated transactions
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Bundle Option 1 PIN Debit Only contd.

Other benefits to consider
The merchant statement will be simplified to display consolidated PIN
debit network line item details
Helps the merchant reconcile their statement faster. Instead of trying to reconcile up to 15 PIN
debit networks on their statement, theyll see either one (bundled) or two (regulated and
unregulated) line items on their merchant statement.
Competitive price point offer rates based on the classification of

regulated versus unregulated and offer the same price point flexibility
for a per item fee for regulated versus unregulated activity.
Continue to price Credit and Signature Debit transactions in your

preferred price method of; Tiered, ERR or Pass Through
Offer simple flat rate pricing alternative for PIN Debit volume
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Example: BUNDLE OPTION 1 PIN Debit Only

Charge one fixed rate 1.25% and $0.25 per item for PIN Debit only
Or Charge
Unregulated PIN Debit
Regulated PIN Debit
1.75% AND $0.25 PER ITEM

.05% AND $0.22 PER ITEM
| 44
Merchant Statement Examples

Summary of Card Fees section of the statement for Bundle Pricing Option 1 PIN Debit Only.
Using Bundled Percent and/or Rate
Using Unregulated/Regulated Percents and/or Rates
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Bundle Option 2 PIN Debit and Signature

Debit
Use this option for merchants that are most sensitive to PIN Debit and
Signature Debit transaction costs.
This pricing option allows you to continue to price Credit transactions in your
usual fashion including; Tiered pricing, ERR or Pass through.
When you choose Bundled Option 2 for both PIN Debit and Signature Debit
transactions you can:
Offer merchants a single Bundled rate for both PIN Debit and Signature Debit
transactions and/or fixed per item charge per transaction.
Alternatively you may choose to offer:

Separate discount pricing for Regulated and Unregulated PIN and Signature Debit
transactions.
You may also charge a different per item charge for Regulated and Unregulated
transactions
| 46
Bundle Option 2 PIN Debit and Signature

Debit contd.
Other benefits to consider:
Potential increased revenue on Unregulated PIN debit volume - if priced @
Signature Debit Unregulated interchange rates (see examples)
Competition cannot determine PIN versus Signature Debit volume, thus making it
more difficult to price compete
ERR pricing still available for Unregulated, while offering competitive pricing for
Regulated Signature Debit transactions
The actual downgrade rate is blurred even more than exists in standard ERR today
The merchant statement will be simplified to display consolidated Signature Debit

and PIN network line item details
Disguises the true transaction counts and amount for each payment type
Continue to price Credit transactions in your preferred price method of; Tiered,
ERR or Pass Through
Offer simple flat rate pricing alternative for PIN an Signature Debit volume.
| 47
Example: BUNDLE OPTION 2 PIN Debit and

Signature Debit
Charge one fixed rate 2.00% and $0.25 per item for both Signature Debit and PIN
Debit transactions
Or Charge
Unregulated Signature Debit and PIN*
Regulated Signature Debit and PIN .05% AND $0.22 PER ITEM
**Note** By choosing to have both Unregulated PIN and Unregulated Signature
Debit volume charged at the UNREGULATED rate of 2.75% and $0.25, you would
see increased revenue on PIN debit activity.
| 48

Summary of Card Fees section of the statement for Bundle Pricing Option 2 PIN Debit and Signature Debit.
| 49
Bundle Option 3 Signature Debit Only

Use this option for merchants that are most sensitive to Signature Debit
transaction costs.
This pricing option allows you to continue to price Credit and PIN Debit
transactions in your usual fashion including; Tiered pricing, ERR or Pass
Through.
When you choose Bundled Option 3 for Signature Debit transactions you
can:
Offer merchants a single Bundled rate for Signature Debit transactions and/or fixed
per item charge per transaction.
Alternatively you may choose to offer :

Separate discount pricing for Regulated and Unregulated Signature Debit
transactions
You may also charge a different per item charge for Regulated and Unregulated
transactions
| 50
Bundle Option 3 Signature Debit Only contd.

Allows you to offer very attractive percentage rate and/or per item for Regulated
transactions, and a competitive percentage rate and/or per item for Unregulated
transactions.
Non participating clients can only select one percentage rate to charge for both regulated &
unregulated making it very inflexible
Offer simple flat rate pricing alternative for Signature Debit volume
The merchant statement will be simplified to display consolidated Signature debit
item details
Helps the merchant reconcile their statement faster
Continue to price Credit and PIN Debit transactions in your preferred price method
of; Tiered, ERR or Pass Through
| 51
Example: BUNDLE OPTION 3 Signature Debit

Only
Example:
Charge one fixed rate 2.00% and $0.25 per item for Signature Debit only
Or Charge
Unregulated Signature Debit
Regulated Signature Debit

Regulated Signature Debit transactions versus Unregulated
| 52

Summary of Card Fees section of the statement for Bundle Pricing Option 3 Signature Debit Only
| 53
Bundle Option 4 Signature Debit, PIN Debit

and Credit
Use this option for merchants that are most sensitive to Signature Debit, PIN
Debit and Credit transaction costs.
This option provides advantage for the client who utilizes flat rate pricing as
their strategy today.
When you choose Bundled Option 4 for Signature Debit, PIN Debit and
Credit transactions you can:
Offer merchants a single Bundled rate for Signature Debit, PIN Debit and Credit
transactions and/or fixed per item charge per transaction.
Alternatively you may choose to offer :
Separate discount pricing for Regulated and Unregulated Signature Debit, PIN
Debit transactions. Credit transactions would also receive Unregulated pricing
You may also charge a different per item charge for Regulated, Unregulated.
Credit transactions would also receive unregulated per item fees.
| 54
Bundle Option 4 Signature Debit, PIN Debit

and Credit contd.
Competitive flat rate pricing - simple to understand price points.
Non participating clients are unable to show consolidated statement totals
Potentially increases revenue for Unregulated PIN and Signature Debit

transactions (if priced at credit interchange rates see example)
Allows you to offer very attractive percentage rate and/or per item for
Regulated transactions, and a competitive percentage rate and/or per
item for Unregulated transactions.
This option offers competitive advantage when pricing a merchant as
ERR. Offer an attractive percentage rate and/or per item for Regulated
items and a separate percentage rate and/or per item for Unregulated
items.
The actual downgrade rate is blurred even more than exists in standard ERR today
The merchant statement will be simplified to display consolidated details

for all transactions
Disguises the true transaction counts and amount for each payment type
| 55
BUNDLE OPTION 4 PIN Debit, Signature

Debit and Credit Example
Example:
Charge one fixed rate 3.00% and $0.25 per item for all Signature Debit, PIN Debit
and Credit (excludes American Express) transactions
Or Charge
Unregulated Signature Debit, PIN and Credit**
Regulated Signature Debit and PIN
**Note** When you choose to have Unregulated PIN, Unregulated Signature

Debit and Credit volume charged at the same UNREGULATED rate of 3.50%
and $0.15, you would see increased revenue on Signature and PIN Debit activity.
Regulated Signature Debit transactions versus Unregulated
| 56

Summary of Card Fees section of the statement for Bundle Pricing Option 4 PIN Debit, Signature Debit and Credit
| 57
American Express One

Point
| 58
Key Benefits of the Program

The American Express OnePoint Program provides the
following merchant benefits:
- One ACH for all cards
- Single source for customer service
- Single merchant statement
- One dispute center
- More payment choices for consumers

- No Cost of entry into the program
| 59
American Express OnePoint

Use only this Pricing set by American Express
*The Discount Rate and the Transaction Fee pricing are dictated by AMEX
and are not negotiable by merchant.
| 60
Pricing Changes
Authorization Fee for American Express
The Authorization Fee for American Express must be less

than or equal to the Authorization Fee for MasterCard /
Visa / Discover Network.
Split Dial is not supported since both the authorization and settlement must
come through First Data.
| 61
Discover Full Acquiring
| 62
Discover Full Processing

Discover Full Processing Benefits to the Client:
Operates just like Visa/MasterCard.
Can be priced the same way or separately from Visa/MasterCard.
Allows client to collect discover residuals for the lifetime of the

merchant instead of a referral fee at signing.
Discover Full Processing Benefits to the Merchant:

One Statement for Visa/MasterCard/Discover
No Separate Discover Contract/Pricing
No Discover Setup Fee
One Deposit for Visa/MasterCard/Discover
Next Day Funding Available for Discover transactions
| 63
Grid Options
Authorization Income Grid, User Defined Income
Grid, Tiered Discount Grid, and Merchant Pricing
Grids
| 64
Concept of Grids
Grids provide the capability of creating portfolio level pricing that
they can apply to merchant accounts.
Allow the client to provide their sales agents standard pricing to
work from when pricing a merchant.
Grids allow the client to create a pricing infrastructure for their
portfolio.
Grids are created at the portfolio level and then applied
to individual merchant accounts when needed.
Grids are used because there is no field on the master
file for a certain fee.
| 65
Grid Options
Authorization Grid: Used to bill authorization
communication fees. (Always Always Always use)
User Defined Grid
(ex: use if you want to charge for a monthly billing element)
Merchant Pricing Grid (MPG)
(Must be used if you are pricing Visa Reward, MasterCard
World cards, and Regulated Debit separate from your
standard Tiered Structure and/or a transaction fee per
qualification.)
Tiered Discount Grid (TDG)
(Traffic cop for Interchange point to a specific bucket)
| 66
Authorization Income Grids

The authorization income grid is used to collect rates for
authorizations for each card type the merchant accepts, except
PIN-debit network, Wright Express (WEX) and Voyager card
types, according to the modes of authorization that the merchant
uses.
Card types that fall into this pricing grid include:
MasterCard
Visa
JCB
AmEx
AmEx One Point
Discover
Discover Full Acquiring
| 67
Authorization Income Grids

Authorization Income Grids allow you to bill for the following
communication types:
Voice Authorizations
CPU Authorizations
POS Authorizations
Electronic POS AVS
ARU Authorizations
VRU AVS
Communication Type
Definitions
VRU (Voice)
Communication
Voice Authorization the merchant receives from a live operator
ARU
Communication
Audio Response Unit Authorizations the merchant requests using a toll free
telephone line
POS Auth
Communication
Point of Sale Authorizations the merchant requests using a local telephone

line LAN phone line (CPU or LAN line).
Address Verification
Communication
Verification of the cardholders name and address the merchant requests

during a transaction. Mainly used by mail, phone, internet merchants who
want to verify a valid name and address prior to shipping
| 68
Authorization Income Grids, contd

While there are no pricing requirements on the FD System, it is
highly recommended that an Authorization Income Grid be
applied to every single merchant boarded.
By using an authorization income grid, you avoid the scenario in
which you are assessed fees for declines, auth only, and batch
closings but do not recoup the fees from the merchant.
Note: You are responsible for maintaining your

authorization income grids.
| 69
Authorization Income Grid Example

In general, you are competing
with the POS Auth fee and the
POS AVS fee.
All other communication
methods are special
circumstances.
To limit the amount of grids in

your portfolio, the example to
the right standardizes the
VRU, ARU, ARU AVS cost but
allows you to create grids with
escalating auth fees for POS
AVS and POS AUTH.
MC
VS
AMX /
JCB
DSVR
VRU
1.75
1.75
1.75
1.75
ARU
1.75
1.75
1.75
1.75
ARU
AVS
1.10
1.10
1.10
1.10
POS
AVS
.05 or
.10
.05 or
.10
.05 or
.10
.05 or
.10
At
cost
thru
cost
+22
At
cost
thru
cost
+22
At
cost
thru
cost
+22
At
cost
thru
cost
+22
POS
AUTH
| 70
User Defined Grids

The User Defined Income Grid allows you to add, change, or customize
charges you assess merchants for providing specific services. Use this
option to collect fixed, reoccurring monthly fees.
Common User Defined Income Grid items include (these are
examples):
Customer Service
Wireless
ISO Club Fee
Supplies
Global Gateway (Yourpay)
Debit Access Fee
eMerchantView
The statement fee and minimum fees are not part of the User Defined
Income Grids. The items in the User Defined Income Grids do not have
fields in the boarding tool and are represented in the Monthly Fees box
on page 3 of the MPA.
| 71
User Defined Grids, contd

Each grid is assigned a three position numeric identifier by the
client.
Each grid description can have up to 20 positions that will
appear on the merchants monthly statement.
Once you establish these grids, you then assign the Grid ID
number of the grid you want to use to the merchant account.
**You can only assign one (1) User Defined Income Grid to a merchant account.
If you have a merchant who needs to multiple assessed to recurring monthly
fees, you will have to build a grid that houses all elements. The grid can
support up to 6 elements.
Note: A grid can be used by more than one merchant. System supports up to
999 grids per agent level.
| 72
User Defined Grid (Example)
Limit:1 grid per merchant and 6 items per grid.
| 73
Merchant Pricing Grids (MPG)

Using with discount methods 01-monthly or 06-daily, Merchant Pricing
Grids allow you to charge a per transaction fee based on how the
transaction qualifies - Offset escalating interchange: Qual per item .10,
MQ per item .15 and NQ per item .25.
MPGs allow for expanded tiered pricing for programs such as Visa
Rewards/MasterCard WorldCard. These are client-defined rates within
the grids created using tiers 4 through 9.
Merchant pricing grids can be built by card/product type such as:
MasterCard Credit
Visa Credit
Discover Credit
MasterCard Debit
Visa Debit
Discover Debit
The description entered on the client defined discount grid is what

appears on the Summary of Card Fees section of the merchant
statement.
| 74
Merchant Pricing Grid (MPG) Example
Note: The System supports the discount rate (MPG % Rate) for qualified, mid-qualified and nonqualified tiers within the MPG, however, these rates should never be entered within the MPG. The
discount rate for qualified, mid-qualified and non-qualified tiers should be entered within the
appropriate parameters / fields on the entitlements / card types at the merchant level. If the discount
rate for qualified, mid-qualified and non-qualified tiers are populated within the MPG and at the
merchant level BOTH rates will be assessed to the merchant, thus the merchant would be double
billed.
| 75
Tiered Discount Grids (TDG)

Tiered Discount Grids determine where the different
interchange programs will qualify:
Qualified , Mid Qualified, Non Qualified, Expanded Tiers 4-9
The Tiered Discount Grid will point interchange programs to the
various tiered buckets of discount. First Data has created
default grids for you to use based on the below industry types:
Retail
Hotel
MOTO/Internet
Restaurant
Petroleum
Business to Business
| 76
Tiered Discount Grids (TDG), contd

The grid code identifiers below indicate Tiered Discount Grids
available for your use if you are using the standard three tiered
pricing. (These grids are already created):
FACSRTL
FACSHTL
FACS MOTO
FACSREST
FACSPETR
FACSB2B
The Tiered Discount Grids direct the individual interchange programs to one of
three interchange buckets:
Qual
Mid Qual
Non Qual
Note: Regulated Debit transactions will be assessed the

qualifying rate.
| 77
Example Three Tiered Discount Grid
| 78
Tiered Discount Grids (TDG), contd

available for your use if you are using the standard three tiered
pricing that breaks out Regulated Debit interchange programs.
(These grids are already created):
REGRTL
REGHTL
REGMOTO
REGREST
REGPETR
REGB2B
The Tiered Discount Grids direct the individual interchange programs to one of
four interchange buckets:
Qual
Mid Qual
Non Qual
Tier 9 (Regulated Debit)
| 79
Example Regulated Tiered Discount Grid
| 80
Expanded Tiered Discount Grids

are available for your use if you are using the expanded tiered
pricing (Pricing Visa Rewards / MasterCard WorldCards
separately):
EXPRTL
EXPHTL
EXPMOTO
EXPREST
EXPPETR
EXPB2B
By using an EXP (expanded) Tiered Discount Grid ID you are

allowing the system to point interchange fee programs to tiers 48 to bill separate pricing for Visa Rewards and MasterCard
WorldCards to be applied.
Note: You must use a MPG and a TDG if Expanded Tiered

Pricing is utilized to cover the Visa Rewards and MasterCard
WorldCard pricing.
| 81
Example Expanded Tiered Discount Grids
| 82
Expanded Regulatory Tiered Discount Grids

are available for your use if you are using the expanded tiered
pricing (Pricing Visa Rewards / MasterCard WorldCards /
Regulated Debit separately):
EXRGRTL
EXRGHTL
EXRGMOTO
EXRGREST
EXRGPETR
EXRGB2B
By using an EXP (expanded) Tiered Discount Grid ID you are

allowing the system to point interchange fee programs to tiers 49 to bill separate pricing for Visa Rewards, MasterCard world
programs and Regulated Debit.
Note: You must use a MPG and a TDG if Expanded Tiered

Pricing is utilized to cover the Visa Rewards and MasterCard
WorldCard pricing.
| 83
Example Expanded Regulatory Tiered

Discount Grids
| 84
Grid Guide Cheat Sheet

Pricing Method
Auth
Grid
User
Defined
Grid
Tiered
Discount Grid
TDG
Merchant
Pricing Grid
MPG
Tiered Pricing
(Standard - buckets 1, 2,3)
ALWAYS
MAYBE
ALWAYS
MAYBE
Tiered Pricing (Standard

w/Regulated Debit buckets 1, 2, 3, 9)
ALWAYS
MAYBE
ALWAYS
ALWAYS
Tiered Pricing (Expanded

buckets 4, 5, 6, 7, 8)
ALWAYS
MAYBE
ALWAYS
ALWAYS
Tiered Pricing
(Expanded w/Regulated Debit
- buckets 4, 5, 6, 7, 8, 9)
ALWAYS
MAYBE
ALWAYS
ALWAYS
Pass Thru (Interchange Plus)
ALWAYS
MAYBE
NEVER
NEVER
ERR
ALWAYS
MAYBE
NEVER
MAYBE
| 85
Appendix
Supplemental Information
| 86
Attributes of Interchange
Transaction attributes determine the Interchange program
assessed. Primary items that affect Interchange are:
Timeliness
Valid electronic authorization

Entry mode (swiped vs. manually keyed)
Environment (card present vs. card not present)
Type of merchant / Industry (MCC)

Type of card product
Transaction amount
Transaction tolerance
Special Interchange program registration
Profile set-up
| 87
Attributes of Interchange, contd

Timeliness - The time between the authorization / transaction date AND
the transaction / settlement date.
To obtain the best interchange rates, the following must be met:
Transactions should meet a 2 day settlement time frame.
One day between authorization and the transaction date, except for Card Not Present / Ecommerce
Merchants which have seven days.
The next best rates:
3 day settlement time frame.
Greater than 3 day settlement:
Results in higher interchange fees referred to as downgrade.
A downgrade indicates the transaction did not meet the required criteria to achieve the best
interchange rate.
| 88

Valid Electronic Authorization - At
the time of the purchase, an
authorization request must be
submitted to the issuer and the issuer
supplies an approved response with
an authorization code.
Authorization request is submitted by the
merchant to First Data.
First Data sends the request to the
appropriate Card Company.
The Card Company routes the request to
the issuing bank who provides the
authorization response.
Merchants who call in for a voice
authorization will pay higher
interchange fees.
| 89

Entry Mode the method in which the authorization request
occurs. Each merchant is set up to have a specific entry mode as
primary.
Swiped transactions indicate the merchant was able to

obtain a full track data by swiping the magnetic stripe
through a point-of-sale device.
Manual transactions indicate the merchant keyed the card
number into their POS device.
Manual entry is the primary reason for most Interchange downgrades
for swiped merchants (card present).
| 90

Environment (Card Present or Card Not Present) - The
environment a merchant utilizes will dictate the interchange
program for which their transactions qualify.
Card present is an environment when the customer is face to
face with the merchant.
Cardholder-Activated terminals (CAT), the card is present but the merchant is not
(e.g. automated fuel pumps).
Card not present is an environment when the customer is not

face to face with the merchant at the time of the authorization
request.
Ex: online bill payment, deferred/recurring payments, electronic commerce, or
mail/telephone orders. Card not present merchants and some CAT transactions
tend to pay higher interchange because the transactions pose a potential greater
risk for fraud and chargebacks.
| 91

Type of Merchant and Industry -Refers to the type of
product or services offered / sold by the merchant and the
industry the products or services are offered within.
The Merchant Category Code (MCC) identifies the products /
services and industry to the card companies during the
authorization and settlement of a transaction:
The MCC MUST match the business type, failure to do so may result
in rule violations as well as the repayment of undue interchange.
Merchants may offer several services or products classified under
different Merchant Category Codes.
If this is the case, it is suggested to use the MCC that best describes the majority
of the merchants business.
In some cases, it may be appropriate to set up another merchant account/MCC
based on the merchants different lines of business.
| 92

Type of Card Product - Refers to the card product being
presented by the consumer at the time of purchase.
Each card company has specific types of card products
including but not limited to consumer, commercial,
signature, and rewards card products.
These have additional breakouts within such as:
Signature Preferred
Infinite
Corporate
Purchasing
Many Interchange programs are based upon the card

products presented.
| 93

Transaction Amount - Refers to the amount of the settled
transaction.
Some interchange programs are determined based upon
the settled amount of the transaction.
(ex: Purchasing Card Large Ticket, Small Ticket, etc)
| 94

Transaction Tolerance - Refers to any amount restrictions
placed on the interchange program.
May be a percentage difference between the authorized
amount and settled amount:
Requirement: the auth and settlement amount must match or a
maximum purchase amount allowed under that interchange program.
(i.e. Merit III for restaurant MCC 5812 is allowed a 25% tolerance)
| 95

Special Program Registration - Refers to the registration
required to participate in special interchange programs.
Examples:
Utility merchants can register to participate in special

programs with Visa.
Program code assigned:
MasterCard assigns a 3-digit program code (i.e. Rxx, Qxx, etc).
Visa assigns a Merchant Verification Value (MVV) 6-digit numeric
value.
| 96

Profile Set Up - Refers to the primary entry points within
system profiles that affects interchange pricing a merchant
may pay for transactions.
Examples:
MCC 5812 is described as an Eating Place while MCC 5814 is described
as a Fast Food Restaurant.
MCC 5812 cannot qualify for MasterCards Convenience Purchase
interchange program but a 5814 is eligible to qualify.
A fast food restaurant set up as a 5812 will be charged a higher interchange rate due to an
inappropriate MCC code.
| 97
Questions?
Interchange, Pricing Options and

Grids
Thank You!
First Data Learning Organization

03 Interchange Pricing Grids Presentation Feb 2012

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Interchange, Pricing

Options and Grids

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Type of card (Visa, MasterCard, Discover, Debit, Reward, T & E,

Merchant Classification (Face-to-Face, Mail Order, Internet, B2B)

Type of point of sale entry (Swiped, keyed)

Variety of specific requirements (see next slide)

Most common merchant industry types are:

Copyright 2011 | First Data Corporation

Interchange Puzzle Pieces

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Interchange Puzzle Pieces, contd

Definition of Base Discount / Surcharge Discount /

Copyright 2011 | First Data Corporation

What is a Fee Class?

Common Fee Class Assignments:

Copyright 2011 | First Data Corporation

What is a Fee Class? contd

Copyright 2011 | First Data Corporation

What is a MCC/SIC Code?

To locate a full list of all MCC/SIC universal codes, access:

Copyright 2011 | First Data Corporation

Durbin - Regulated vs. Unregulated

Durbin-Regulated vs. Unregulated Illustration

Retail Signature Debit Scenario: $100 transaction

Regulated Pin Debit Scenario Start: $100 transaction

Copyright 2011 | First Data Corporation

Omaha Backend Pricing Options

Enhanced Recover Reduced

Applying a qualified discount rate to all transactions as well as a

Pass Thru Pricing

Taking the interchange and dues and assessments cost assessed to

Copyright 2011 | First Data Corporation

Copyright 2011 | First Data Corporation

Example Buckets and Discount Pricing:

Copyright 2011 | First Data Corporation

Tiered Pricing, contd

Copyright 2011 | First Data Corporation

Qualification Buckets-Three Tiered

Qualification Buckets-Three Tiered + Regulated

Qualification Buckets-Expanded Tiered

Qualification Buckets-Expanded + Regulated

World Card Qual

World Card Mid-Qual

World Card Non-Qual

Copyright 2011 | First Data Corporation

Copyright 2011 | First Data Corporation

Relatively simple pricing.

Low merchant visibility

Copyright 2011 | First Data Corporation

Copyright 2011 | First Data Corporation

Pricing Enhance Recover Reduce (ERR)

The Recover reduced Fees program is controlled by the Interchange

Copyright 2011 | First Data Corporation

Pricing Enhance Recover Reduce (ERR)

Copyright 2011 | First Data Corporation

= 007 CPS Retail (1.54% + .10)

Transaction 1 Qualifies @ 007 CPS Retail ( 1.54% +.10)

Transaction 2 Qualifies @ 055, EIRF (2.30% + .10)

Potential Interchange = $1.64

ERR Surcharge 1.5% = $1.50

Copyright 2011 | First Data Corporation