Why is payments pricing higher in one market vs another?

What you see on a payments pricing page

The Stripe pricing page is public, and one can toggle between markets. Singapore page is Stripe.com/sg/pricing and one could change the market code to AU https://stripe.com/au/pricing.

What you see depends on your market

Sometimes, customers in SG ended up on the AU/US/EU site. On the AU site, merchants saw the 1.75% + 0.3 AUD price (see below), expected Singapore’s to be the same, but then were surprised when they found out that Singapore sticker pricing started at 3.4% + 0.5 SGD.

AU pricing, screenshot as of mid Aug’22. I don’t own this please go to https://stripe.com/au/pricing
  • Why does pricing differ by market?
  1. Share how costs differ by market
  2. Explain the implications on merchant fees and differences across markets

Payments costs drivers

First, payment costs have three components.

  1. Interchange fees: fees that go to the bank that issued the card.
  2. Scheme fees: fees that go to the card networks like Visa, Mastercard.
  3. Acquirer + Processor fees: fees that go to the payment service provider (PSP). This is their margin.
Image is my own, please do not use without written permission

Second, “Interchange” is the majority of the total payment fees a merchant pays.

Interchange is the majority of the payment fees that merchants pay. Interchange funds card rewards like miles, cashback, and more. Interchange tends to be higher for credit rather than debit cards in most markets. In the cards world, merchants absorb payment fees in order to accept card payments.

Third, the difference in pricing between markets is driven mostly by interchange rate by market.

In some markets, interchange is regulated and capped (eg to be <0.X% for debit, <1% for credit), which you can find online [1]. Australia, Malaysia, Europe are examples of regulated interchange markets.

Actual picture taken at an AU SMB

Conclusion

The message I often repeated was: sticker pricing across payment companies will differ by market, because of the difference in underlying costs. That is why a mid size Singapore / Hong Kong / US merchant will pay more fees to their payment provider than a mid size Australian merchant, because of higher interchange (see a US vs AU comparison here in graph B2)

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Celine Wee

Celine Wee

Musings are my own: a collection of learnings from Payments, Go To Market, Web3, Biz Ops across Stripe, Coinbase, Twitter.