
Balanced Makes Volume Pricing Public - zende
http://blog.balancedpayments.com/volume-pricing/
======
dnfriedman
This is actually one of the very few things that has bothered me about Stripe
– they don't make their volume pricing public (Amazon does, now Balanced
does). We've had to email when we hit larger sums to get pricing reduced.

Edit: although to be fair, I asked them about this, and they said their
processing costs vary user to user, so they don't have a simple matrix
(rather, they apply discounts based on the costs associated with an account).
That's probably the best possible answer short of a pricing matrix...

~~~
pc
Right; we've gone back-and-forth on how best to implement our volume pricing.
The upside of a clear pricing matrix is that it's clear. The downside is that
it's conservative -- we can (and do) give _lower_ pricing than what we could
commit to in a matrix like this to many users.

Perhaps we should release a matrix of what we do on average (or a set of
minimum discounts) or something.

(As ever, feel free to drop me a line to discuss -- patrick@stripe.com.)

~~~
cperciva
_we can (and do) give lower pricing than what we could commit to in a matrix
like this to many users._

Can you elaborate on this? What factors influence what rates you can (and do)
give? Chargeback rate? Mix of card types? Type of product or service being
sold?

 _Perhaps we should release a matrix of what we do on average_

I think that would be great -- even better if it's combined with a list of
situations which would result in the rates being higher or lower than the
norm.

~~~
cristinacordova
(I work at Stripe)

The biggest factor in processor costs is actually the card mix, and not the
volume that a business generates. To give you some sense, international, AmEx
and corporate rewards cards tend to be much more expensive to process. Debit
cards, on the other hand, tend to be fairly inexpensive to process for
(although, despite the costs mentioned elsewhere in the thread, not all debit
cards qualify for Durbin debit rates).

Balanced's pricing matrix only takes one factor (volume) into account. So, for
example, if a business accepts a high percentage of debit cards, we can offer
a significantly lower rate than the prices in Balanced's matrix.

~~~
zende
What happens if a customer's card mix changes?

~~~
cristinacordova
Generally, we hold to the offered rate even in the case that the card mix
changes and becomes more expensive. In the case that the card mix becomes less
expensive, we'll decrease the rate as our costs have changed and we can offer
a better price. Our pricing is always based on the costs of the transactions,
rather than volume alone.

There are downsides to focusing rates and adjusting them on volume alone. With
the Balanced pricing matrix, if a merchant has a mediocre Q3 in volume, their
pricing could increase for the highest volume quarter (Q4), even if Balanced's
effective cost per transaction hasn't changed at all.

~~~
zende
> Generally, we hold to the offered rate even in the case that the card mix
> changes and becomes more expensive. In the case that the card mix becomes
> less expensive, we'll decrease the rate as our costs have changed and we can
> offer a better price. Our pricing is always based on the costs of the
> transactions, rather than volume alone.

This poses an interesting optimization problem. Given that model, a customer
should email you at the beginning of every month asking you to (re)evaluate
their rate given whatever period (trailing month? trailing 3 months?) you use
to determine the card mix.

If the card mix has changed such that Stripe's cost has decreased, the
customer would get a lower rate. If the card mix has not changed or has
changed such that Stripe's cost has increased, the customer would maintain the
same rate.

The above process could further be improved if the customer keeps track of
their own card mix and only emails when favorable to do so. This could even be
automated.

> There are downsides to focusing rates and adjusting them on volume alone.
> With the Balanced pricing matrix, if a merchant has a mediocre Q3 in volume,
> their pricing could increase for the highest volume quarter (Q4), even if
> Balanced's effective cost per transaction hasn't changed at all.

Yes. It's certainly not perfect. We used to have a tiered model where in each
month the first $x was charged at some rate, the next $y would be charged at
another rate, etc. It became difficult for customers to calculate their
effective rate and project into the future. We'll continue try to improve
based on the feedback we get from customers on our current model. Regardless,
we'll publish any improvements in our pricing model and make it available to
everyone.

I don't want to make this conversation about Balanced vs. Stripe. I asked my
question because I was genuinely interested and wanted to see if there was
something we could learn from each other. If you do have an internal formula,
I encourage you to publish it. If the model is better than the one Balanced
uses, it will allow us to learn and for everyone to improve. _That_ is the
nature of openness and what we're trying to accomplish.

~~~
cristinacordova
That's assuming we're only looking at the card mix for a given month.
Generally, we're looking at a trailing 3-month period -- and if a user wants
to email us every three months to ask if we can lower their rates, we welcome
them to do so.

We've certainly thought about how we can be more open with our pricing, as
Patrick mentioned, and for customers that want details about why their rate is
the way it is, we'll definitely dial-in to the details. We optimize for
simplicity though, as we know that many of our users don't want to read an
excel spreadsheet detailing the variety of charges we incur from card networks
and other parties, which factor into their overall rate. Many of our users
have chosen Stripe because we abstract away all the complexity involving
pricing.

~~~
anthonys
Why not give clients the benefit of a rolling 3-month rate automatically? That
way you could help educate them (by showing them their own data back to them-
scheme tier x volume) as to how merchant charges work.

To keep it simple, you could require a minimum volume to participate which may
also help you get people to consolidate their merchant activity with you,
similar to the way traditional tiering works.

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abalone
And to further the transparency, Visa & Mastercard also publish their
interchange fees, which is the main cost for a processor like Balanced.

Here's Visa's: [http://usa.visa.com/download/merchants/visa-usa-
interchange-...](http://usa.visa.com/download/merchants/visa-usa-interchange-
reimbursement-fees-april2013.pdf) For online the fee program is usually
"e-Commerce Basic".

So here's Balanced's interchange costs, for Visa:

Major debit cards[1]: 0.05% + $0.21

Unregulated debit cards (small banks): 1.65% + $0.15

Non-rewards credit cards: 1.8% + $0.10

Rewards credit cards: 1.95% + $0.10

Visa Signature Preferred (highest-end Visa cards): 2.4% + $0.10

Mastercard is usually similar. AmEx is usually more expensive.

\-----------

[1] This 0.05%/$0.21 rate is super interesting to note. The Durbin amendment
was recently passed and regulates most debit card interchange down to
practically nothing. This basically just happened and is potentially a huge
profit center for processors who haven't updated their fees to reflect it. My
guess is processors are right now all looking at each other and waiting to see
who breaks rank.. but for the moment, merchants are not necessarily seeing the
benefit. Processors are.

~~~
dangrossman
This is one of the advantages to having a real merchant account instead of
using a 3rd-party processor like Balanced/PayPal/Stripe. I pay interchange +
0.04% for all cards, so when someone pays me with debit, I'm charged 0.09% and
not 2.9%. Several thousand dollars a month of my subscription payments are
from debit/check cards; it adds up.

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TomBeckman
I've been dealing with credit card merchant accounts for our company for many
years. The lack of transparency in the industry made it impossible to know if
I was getting the best rates possible. Then I found
[http://www.cardfellow.com](http://www.cardfellow.com) where major providers
compete for your business. All bids are cost plus based, so you can do a real
comparison of the bids. Rates are locked in for life. You can keep the gateway
that you're currently using. I ended up with a different division of the same
provider I was using, but at a much lower rate. This reduced my net merchant
account cost by 3 percentage points. Give it a try. There's no cost. And I
have no connection to CardFellow other than that of a very happy customer.

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mcorrand
I'm sorry if this is stated somewhere but I have not seen it anywhere. How are
these thresholds calculated? Is this per store/merchant account or for the
whole marketplace?

~~~
jareau
(I'm a Balanced employee)

We calculate these fees per marketplace. Usually a single marketplace has many
merchants associated with it.

~~~
mcorrand
Thank you! This is pretty nice then, I think when I first stumbled upon the
pricing page a while ago, these reduced rates were already public. At the time
I just assumed it was counted by store and got back to work. I still chose
Balanced for the native marketplace support and general "openness" feel I get
from the company.

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rasengan
Bravo to transparency. Isn't this expensive though?

~~~
throwaway85723
Uh...no. In fact, 1.9% is probably way less than their costs (ie,
unsustainable).

~~~
zende
It's not.

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harrisreynolds
Cool. So this is essentially per marketplace? I've just launched simplegym.co
that uses Balanced for handling payments. We currently are only doing around
$10K/month in payments, but I believe it could grow into the discounted volume
over the next few months.

~~~
jareau
Thanks for using Balanced.

Yes, this is per marketplace. We'd love to give you a discount. Our discounts
are applied quarterly, so if you get to $100K+ by April 1, we'd be happy to
drop your rate to 2.7% + 30¢

More here:
[https://www.balancedpayments.com/pricing](https://www.balancedpayments.com/pricing)

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MyNameIsMK
I am really trying to integrate balanced into my software but I am just
getting stuck. A few video tutorials or a live workshop/meetup/hack day would
really help!

~~~
zende
MyNameIsMK: We'd be happy to help. We're online right now for chat on
#balanced on irc.freenode.net, which you can join online by going to
[http://webchat.freenode.net/?channels=balanced&uio=MTE9OTIaf](http://webchat.freenode.net/?channels=balanced&uio=MTE9OTIaf)

You can also email us at support@balancedpayments.com

~~~
jareau
live workshop/meetup/hack day would be really fun!

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johnnyg
Does this flat rate include AMEX transactions?

~~~
jareau
yes.

