Pay Less, Grow More

Every time a Canadian business processes a card payment, the transaction moves through several parties, each of which takes a portion of the fee. Understanding this flow is the first step to knowing whether you are paying a fair price for payment processing.

The parties involved in a card transaction are:

• The card network (Visa, Mastercard, American Express): sets the interchange rate, which is the wholesale cost of processing a transaction on that network.
• The issuing bank: the bank that gave the customer their card. The interchange fee goes to the issuing bank.
• The payment processor: the company that handles the transaction, provides the terminal or gateway, and manages the merchant account. The processor adds its margin on top of interchange.
• The merchant: the business accepting the payment, who pays the total of interchange plus the processor’s margin.

The total fee a merchant pays is therefore made up of two parts: the interchange cost (set by the card networks, non-negotiable) and the processor’s margin (the part you can shop around for and negotiate).

Interchange-plus pricing is a pricing model where the merchant pays the actual interchange cost of each transaction plus a fixed margin from the processor. On a merchant statement, this appears as two separate numbers: the interchange rate (which varies by card type) and the processor’s markup.

For example, if a premium rewards card has an interchange rate of 1.65% and the processor’s margin is 0.50% plus $0.10 per transaction, the merchant pays 2.15% plus $0.10 on that transaction. A basic debit card with a lower interchange rate of 0.10% would cost the merchant 0.60% plus $0.10 — noticeably less, because the interchange portion is lower.

The advantage of interchange-plus is transparency. The merchant can see exactly what the card networks charge and what the processor charges. This makes it possible to compare processors on their actual margin, and it means the merchant automatically benefits when interchange rates go down — something that does not happen with flat-rate pricing.

Tap2Pay uses interchange-plus pricing for all merchants. The processor margin is disclosed upfront, and there are no long-term contracts or early termination fees.

Payment processing contracts in Canada can include fees that are not always disclosed upfront. Common ones to watch for:

• Early termination fees: charges for leaving a contract before it expires, sometimes hundreds or thousands of dollars.
• Equipment lease fees: ongoing monthly payments for a terminal that may cost less than the total lease payments over the contract term.
• PCI compliance fees: monthly or annual charges for PCI compliance, sometimes charged even when the merchant has completed their self-assessment.
• Batch or settlement fees: a small fee charged each time the terminal batches and settles transactions, typically daily.
• Non-qualified surcharges: additional percentage charges applied when a transaction does not meet certain criteria, which can push the effective rate well above the quoted rate.

Tap2Pay does not charge early termination fees, does not require long-term contracts, and discloses its processor margin upfront. The interchange cost passes through at cost, with no surcharge added on top of the card network rate.

The two most common pricing models in Canada are flat-rate and interchange-plus. Each has trade-offs:

Flat-rate pricing

The processor charges a single percentage rate on every transaction, regardless of card type. This is simple to understand — you know the rate upfront and it does not change. The trade-off is that the flat rate is set high enough to cover the processor’s cost on the most expensive cards (premium rewards cards), which means the processor keeps a larger margin on lower-cost transactions like basic debit or standard credit cards. As a business grows and processes more transactions, the gap between what it pays and what it would pay under interchange-plus grows.

Interchange-plus pricing

The merchant pays the actual interchange cost plus a fixed processor margin. The rate varies by card type, but the processor’s margin is the same on every transaction. The merchant benefits when customers use lower-cost cards, and the processor’s margin stays consistent and transparent. The trade-off is that the statement is more detailed and the rate varies by transaction, which requires slightly more attention to understand.

For businesses processing more than a few thousand dollars per month, interchange-plus is typically the lower-cost option over time. For very small or new businesses with low volume, the simplicity of a flat rate may be worth the slightly higher cost. Tap2Pay uses interchange-plus because it is the more transparent and generally lower-cost model for growing Canadian businesses.

A common concern when considering a switch is the risk of downtime — a gap where the business cannot accept payments. With proper coordination, this does not need to happen.

The steps to switch processors smoothly are:

1. 1Get a quote from the new processor based on your actual statement and transaction profile.
2. 2Review the new processor’s contract terms and confirm there are no early termination fees or long-term commitments.
3. 3Submit the merchant account application — with Tap2Pay this takes under five minutes and most businesses are approved the same day.
4. 4Schedule the terminal setup and activation with the new processor before canceling the old service.
5. 5Train staff on the new terminal — Tap2Pay handles this as part of the onboarding.
6. 6Once the new terminal is live and tested, cancel the old processor service. Check for any termination fees in the old contract and confirm the cancellation is processed.

Tap2Pay manages this entire transition, including terminal setup, staff training, and activation timing, so the business is never without the ability to accept payments. Most businesses are live on Tap2Pay the same day they are approved.