Every payments provider will quote a rate. Almost none of them will explain, unprompted, how much of that rate is interchange fees versus their own markup. For a software vendor evaluating embedded payments, that gap matters more than it looks.
The problem is not that pricing is complicated. It is that most of the complexity is optional, and it usually favors whoever wrote the contract.
What Are Interchange Fees, and How Do They Fit Into Embedded Payments Pricing?
Interchange fees are the fees set by the card networks, not the payments provider, and paid to the card-issuing bank every time a transaction runs. They are a fixed cost of accepting card payments, not something a provider invents or controls. In practice, the fees flow through three layers: interchange, network assessment fees, and processor markup. Only that third layer, the markup, is something a provider actually controls and a software vendor can negotiate.
That distinction is the foundation of every embedded payments pricing model. Flat-rate pricing charges one fixed percentage on every transaction. It is simple to quote, but it caps how much value a software vendor can capture as volume grows. Interchange plus pricing (sometimes called IC+) passes through the actual interchange cost and adds a transparent markup on top, so an ISV can see exactly what it is paying versus what it is marking up. Blended or tiered pricing groups transaction types into buckets with a single rate per bucket. That simplifies the invoice, but it hides where the underlying costs actually sit.
Revenue share works differently. Instead of the platform paying a rate, it earns a portion of the processing margin its merchants generate. Celero Fusion uses exactly this structure, letting ISVs earn a share of the processing revenue their merchants generate.
Most platforms encounter some mix of these, sometimes more than one within the same contract.
Why Does Blended or Flat-Rate Pricing Make It Hard to See What ISVs Are Actually Paying?
A single blended rate is easy to present and hard to question. When interchange fees, network fees, and provider markup are folded into one number, an ISV has no way to tell how much of that rate is a true, unavoidable cost and how much is margin the provider is keeping. Processing fees are one of the largest costs merchants pay to accept card payments industrywide, and most of that cost sits in the part of the rate that never gets broken out.
This becomes more consequential as volume grows. A rate that looked reasonable at a small merchant base can quietly become expensive at scale, and a blended structure makes it difficult for a software vendor to identify exactly where that shift happened or renegotiate around it.
How Does Pricing Change as an ISV’s Merchant Volume Grows?
Pricing that was negotiated at signup rarely stays optimal forever. As a platform’s merchant base and transaction volume increase, the underlying economics shift, and a rate structure built for early-stage volume can leave real money on the table at scale. The question is not just what the rate is today. It is who is responsible for noticing when that rate no longer fits.
Some payments partners revisit pricing proactively as volume grows. Others leave that entirely to the ISV to notice and initiate. That difference rarely shows up in a sales conversation, but it shows up clearly in a year of statements.
Why Is Embedded Payments Pricing a Long-Term Decision, Not Just a Signup Detail?
The rate an ISV agrees to at signup is rarely the rate that matters most a year later. Interchange plus structures, markup visibility, and how pricing evolves at scale compound over time in ways a single quoted number cannot capture. Treating pricing as a one-time negotiation, rather than an ongoing part of the partnership, is where most of the value gets lost.
For a closer look at how these models work in practice, see Celero’s ISV Payment Monetization Guide, which breaks down interchange revenue and revenue share in more depth, or Celero’s Integrated Software Vendors page, which outlines Celero Fusion’s approach to flexible merchant pricing and revenue sharing directly.
What Should ISVs Actually Ask a Payments Partner About Pricing?
Before signing with any embedded payments provider, software vendors should ask directly:
- Interchange plus versus blended pricing. Ask to see interchange fees and markup broken out separately, not just the final number, to confirm this isn’t a blended rate in disguise.
- What revenue share actually applies to. A percentage of gross processing revenue and a percentage of net margin after costs are very different numbers wearing the same label.
- How pricing gets revisited as volume grows. Whether that is a proactive conversation the partner initiates, or something the ISV has to request itself.
- Fixed per-merchant or platform fees. Whether there are additional fees that scale with the number of merchants onboarded, separate from the per-transaction rate.
- Flexibility to renegotiate later. Whether existing terms can be revisited as the platform grows, or the vendor is locked into the original structure indefinitely.
A provider’s willingness to answer these clearly, before a contract is signed, is often a better signal than the headline rate itself.
Frequently Asked Questions
Who pays interchange fees?
The merchant ultimately pays interchange fees, though how visibly depends on the pricing model. Under flat-rate or blended pricing, that cost is folded into the quoted rate. Under interchange plus pricing, it is broken out separately so the merchant, and the ISV, can see it clearly.
Is interchange plus pricing always better than flat-rate?
Not necessarily. Flat-rate pricing can be simpler for lower-volume software vendors, while interchange plus tends to offer more value and transparency as volume grows. The right choice depends on a platform’s scale and how much visibility it wants into the underlying costs.
Can ISVs negotiate pricing after they’ve already signed with a provider?
It depends entirely on the provider. Some structures are built to be revisited as volume changes, others are fixed for the life of the contract. This is worth confirming before signing, not after volume has already grown.
What is revenue share, and how is it different from a markup?
A markup is an amount a platform adds on top of a base cost and charges its merchants directly. Revenue share is a portion of the processing margin the payments partner earns, paid back to the ISV, without the platform setting or collecting that rate itself.
Key Takeaways and Next Steps
Embedded payments pricing is rarely as simple as the number on the sales page. Flat-rate, interchange plus, blended, and revenue share structures each shift the real cost and opportunity in different directions, and the difference often only becomes visible at scale. Software vendors who ask specifically how interchange fees and markup are structured, and how pricing changes over time, are in a stronger position than those who evaluate a partner on the headline rate alone.
For a broader framework on evaluating a payments partner beyond pricing, see Celero’s payment processing partner checklist.
Wondering what a transparent breakdown of interchange fees and markup would actually look like for your platform? Start the conversation with Celero Fusion.