Excluding instances of legal mandate or full-fledged revolts, a payment network has never voluntarily reduced their processing fees. Since launch, LevelUp has maintained a mission of "Interchange Zero" the belief that moving money should be free.
As part of that, LevelUp made a promise that it would constantly work towards bringing its own payment processing fees down over time. For the last year, that belief existed merely as a vision. LevelUp offered a flat 2% processing rate (already the lowest available) on LevelUp transactions, despite LevelUp’s real cost (the fees paid to card companies to process the transactions) initially being closer to 5.4%. Through a series of advancements to their processing infrastructure (explained below), LevelUp began to chip away at that cost bit by bit.
This past month marked the first time LevelUp broke even on processing, thus enabling LevelUp to begin delivering on their vision of Interchange Zero.
Frequently Asked Questions about Interchange Zero:
Why'd it take so long for LevelUp to drop fees for the first time?
Until now, it cost LevelUp more than 2% to process payments. Until Jan 2013, LevelUp was paying exactly what businesses would have paid if they were processing cards directly, averaging 5.4% of the transaction total. LevelUp was simply eating the difference.
How does LevelUp achieve lower fees?
If you pay with LevelUp, you may notice LevelUp doesn’t charge you right away. Instead, transactions are grouped together and only charged once a month, much like how Apple groups iTunes purchases together. This process, called “bundling”, helps LevelUp lower its transaction fees and thus lower the fees we charge to merchants.
A 0.05% drop sounds small, is it?
Dropping from 2.00% to 1.95% might not sound like a lot, but extrapolated across the economy, the drop represents $250 million in savings for local businesses. Every .01% drop is like a $50 million economic stimulus pumped back into the local economy.
Why should consumers care?
Though businesses directly pay the $50 billion in payment processing fees each year, consumers are often impacted in the form of higher prices. Lower interchange means lower prices. This can be seen most directly in the LevelUp ecosystem in the form of higher rewards. As businesses save more with LevelUp, they're able to offer larger savings and rewards to their loyal customers.
Will Levelup lower fees again in the future?
Yes. LevelUp's new fee rate will go into effect on April 16th. Businesses do not have to take any action to get the lower rate.