ISO identifies $4.9M in annual network fee savings and cost recovery
This $20-30B US ISO was absorbing network costs its peers pass through to merchants. A 4-6 week review found $4.9M a year in network fee savings and cost recovery, two-thirds of it from realigning merchant pricing with network costs.
| Client type | ISO |
|---|---|
| Size | $20-30B annual processing volume |
| Market | United States |
| Scope | Network fees and merchant pricing |
| Analysis time | 4-6 weeks |
| Line items flagged | 100 |
| Potential savings | $4.9M a year |
| Savings relative to volume | 1-2 bps |
| Ongoing | Network Fee Tracking |
What did the review find?
Merchant pricing wasn't keeping pace with what the networks charge, so the ISO was absorbing network costs that its peers pass through to merchants.
The review flagged 100 line items and sorted them by priority, with lower-priority items set aside for a later phase.
Where did the savings come from?
Merchant pass-through was the largest category at about two-thirds of the total. A smaller amount came from best practice changes, and $1.5M in lower-priority items was set aside for later.
| Category | Amount | Share |
|---|---|---|
| Merchant pass-through | $3.2M | 64% |
| Best practice alignment | $0.2M | 5% |
| Set aside for a later phase | $1.5M | 31% |
| Total | $4.9M | 100% |
How long did it take, and what data was needed?
The analysis took 4-6 weeks and used the ISO's network invoices and volume data. No system integration was required.
What happened after the review?
The client moved to CardTraq Network Fee Tracking to monitor implementation of the savings and flag new fees as they appear. Network fees change throughout the year, so ongoing tracking keeps the savings from slipping away.
What does this mean for other ISOs and acquirers?
Network fees move every year. When merchant pricing isn't updated to match, the ISO absorbs the difference and margin erodes quietly.
A pricing review alongside the network fee review shows how much of that cost is being recovered today.
Questions and answers
How can an ISO reduce its network fee costs?
By recovering network costs through merchant pricing as well as cutting fees. In this review, merchant pass-through was about two-thirds of $4.9M a year.
What is merchant pass-through of network fees?
Pricing that passes network costs on to merchants rather than absorbing them. When merchant pricing isn't updated as network fees change, the ISO absorbs the difference.
How much did this ISO identify relative to its volume?
$4.9M a year, or 1-2 bps of annual processing volume, including $1.5M in lower-priority items set aside for a later phase.
Later-phase items are lower-priority opportunities set aside for now. Figures are annualized.
Most programs we review are paying network fees they don't need to. A review takes 4-6 weeks and needs only your network invoices and volume reports.
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