This one will be short. When you hear the term wholesale credit card processing, run as fast and as far as you can.
Wholesale means buying at a lower price than everyone else and passing some of that saving on. That is not possible here, because the two largest parts of your bill are not bought at all.
Interchange is set by the card networks and is identical for every merchant in a given category. The assessments on top of it are set the same way. Nobody gets a volume discount on them and nobody resells them cheaply. What is left is the margin the processor or the ISO adds, and that is a negotiation, not a wholesale tier.
So when someone offers you wholesale rates, what they are actually offering is a lower markup. Which is worth having. It is just not what the word means, and the language is doing a job.
Ninety-nine percent of the time, it is an ISO, an Independent Sales Organization. To be clear, I have no issue with that. Unless you are a very large merchant, more often than not you will get a better deal and a lower discount rate with an ISO than with an actual processor.
That surprises people, so it is worth explaining. Processors will often mark up their direct pricing to encourage you to go through an ISO, because they do not want the cost of selling and servicing the account. They just want the processing.
Below the ISOs are sales agents, who resell for the ISO. And alongside them are MSPs, Merchant Service Providers, which are the same thing as an ISO except that they are banks reselling merchant services. All of them can and do use the word wholesale.
If you want the longer version of how that layer works, we have a full piece on what an ISO is in payments.
This is a pet peeve. Why call it a discount rate? Nothing is being discounted. They are not reducing a fee, they are adding to one. It is a markup, and markup is the word that would describe it honestly.
And then, having named their markup a discount, they will tell you they offer wholesale rates on it. But I digress.
Scroll to the bottom of their website. An ISO carries a fine print disclosure naming the sponsoring banks it is registered under, like this one.
Those names are the sponsoring banks behind the processors. Wells Fargo is the sponsoring bank for Fiserv, formerly First Data. Fifth Third Bank is the sponsoring bank for Worldpay.
If you do not see a disclosure like that anywhere, the odds are you are dealing with a sales agent who resells for an ISO. And yes, they offer wholesale credit card processing too. Or so they say.
There are only a handful. The two largest are Fiserv, formerly First Data, and Worldpay, which operates under a number of names as it gets bought and spun off again. That is a long story on its own.
If you are with Worldpay, or any of the many names it goes by, take advantage of our free audit. I am not saying you do not need one with the other guys. But we find Worldpay to be the most creative biller. That was actually nice of me. Everyone tells me to be nicer, so I am giving it a shot, and hopefully you can read between the lines.
Here is the tell that matters most. Even the largest processors do not advertise wholesale credit card processing. They do not use the phrase at all. It is the small ISOs, many of them working out of their mom’s basement, who will try to convince you they have it.
There is no such thing as wholesale credit card processing. Only people who say things that are not true.
Since wholesale is not a real thing, here are the questions that do get you somewhere.
The statement decoder covers what the individual line items mean, and credit card processing fees explained covers how the pricing is put together.
No. Interchange is set by the card networks and is the same for everybody, and the assessments on top of it are fixed too. Nobody buys those at a discount and passes the saving on, so there is no wholesale tier to sell you. The phrase describes a pricing story, not a product.
An Independent Sales Organization. It sells and services merchant accounts on behalf of an actual processor, and takes a margin on the pricing. Most merchants who think they are dealing with a processor are dealing with an ISO.
Not usually. Processors often mark up their direct pricing to push accounts toward their ISO channel, because they want the processing volume without the cost of selling and servicing the account. Unless you are very large, an ISO frequently gets you a better rate than going direct.
Scroll to the bottom of their website. An ISO has to carry a fine print disclosure naming the sponsoring banks it registers under. If there is no disclosure at all, you are most likely talking to a sales agent reselling for an ISO.
A Merchant Service Provider. Functionally the same as an ISO, except it is a bank reselling merchant services rather than an independent company.
Good question. The discount rate is the processor or ISO margin added on top of interchange and assessments. Nothing is being reduced. Markup would be the honest word for it.
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Do you have a “Risk Fee” on your credit card processing statement?
No? Good. You are luckier than a lot of merchants, and you should keep reading anyway.
If I asked whether your money is safer in a box on your back porch or in the bank, you would say the bank and give me an eye roll.
