BIN sponsor recovers about $1.3M a year more in network fees with a new cost allocation model

What was the problem?

The sponsor's old process charged program clients only for fees tied directly to them. About half its network fees sat in a general pool that was never allocated, so the bank absorbed costs its program clients generated.

Not every network fee maps neatly to a program, so recovering them needs a clear allocation methodology, and building one by hand is slow and complex.

What did CardTraq build?

• Inputs, at BIN level. Visa and Mastercard fee invoices, a client mapping matrix, authorizations, and cleared transactions and volumes.
• Allocation rules. BIN-to-client mapping, including shared BINs. Client-specific and BIN-specific fees go to the client they belong to. Universal fees are apportioned across all clients using more than 50 apportionment factors.
• Outputs. Monthly client invoices, line-level billing detail for each client, and a summary recovery dashboard.

What changed?

Every network fee is now assigned to a client. Recovery of the fees program clients generate rose from 44% to 95%, worth about $1.3M a year more. Fees from the bank's own programs stay with the bank.

Why does recovery stay high?

The model runs every month on the most recent network fee invoices and generates each client's invoice. New fees and changes are picked up each cycle, so recovery holds at 95% month after month instead of slipping between one-off reviews. The model can also run quarterly, and refreshes are optional: clients can keep it updated themselves if they prefer.

Is the new allocation fairer, or just higher?

Fairer. Most clients now carry a larger share because costs that used to sit in the general pool are spread across them. One client's share fell by about half, because fees it had been charged directly are now shared across all clients.

How does the bank keep track of new network fees?

Alongside the allocation model, the bank uses CardTraq Network Fee Tracking to monitor implementation of savings and flag new fees as they appear, so new charges are caught early and allocated correctly.

What does this mean for other BIN sponsors?

For a sponsor, an unallocated pool is cost it carries on behalf of its programs. A model that allocates every fee shows what each program actually costs and gives the sponsor a defensible basis for billing it back.

Each charge traces back to the network fees behind it, which makes client queries straightforward to answer.

Questions and answers

How much of its network fees can a BIN sponsor recover from program clients?

In this case, 95% of the fees its program clients generate, up from 44%. Fees from the sponsor's own programs stay with the sponsor.

How does a cost allocation model keep recovery high?

It runs every month on the latest network fee invoices and generates each client's invoice, so new fees and changes are picked up each billing cycle. It can also run every quarter, and refreshes are optional: clients can keep the model updated themselves if they prefer.

What happens to network fees that can't be traced to one client?

They're apportioned across all clients using consistent factors instead of sitting in a general pool the sponsor absorbs.

Does a new allocation model raise every client's costs?

No. In this case, one client's share fell by about half.