Visual Framework

The Payments Economics Waterfall

How interchange flows from the card network through the acquiring bank, issuing bank, and middleware layers — and what each party captures. The gap between the BaaS path and the direct path is where most programs leave economics.

Card Transaction — $1,000

Customer pays with a business Visa card. Merchant (or platform) processes through acquiring bank.

↓

Card Network (Visa / Mastercard)

Routes transaction. Sets interchange rates. Takes network assessment fee.

Network fee: ~11 bps
~$1.10 per $1,000
↓

Acquiring Bank

Processes transaction for merchant. Pays interchange to issuing bank. Keeps processing spread.

Pays: 175 bps to issuer
$17.50 per $1,000
↓

Issuing Bank (Sponsor Bank)

Receives interchange from acquiring bank. Retains a portion. Routes remainder based on program model.

Receives: 175 bps
Bank retains: ~15 bps
↓ Path splits here based on program model ↓
BaaS Model

BaaS Middleware Layer

Takes margin cut on interchange for infrastructure and compliance services.

Captures: 80–95 bps
$8–$9.50 per $1,000
↓

Platform (BaaS)

Receives residual after bank and BaaS shares. Typical outcome.

Receives: 60–80 bps
$6–$8 per $1,000
Direct Model

No Middleware

Direct bank relationship. No intermediary capturing interchange share.

No middleware cost
0 bps extracted
↓

Platform (Direct)

Receives full interchange net of bank share and network fees.

Receives: 140–160 bps
$14–$16 per $1,000
Annual Economics Gap at $10M Monthly Card Volume
$720K–$960K
BaaS model annual revenue
$1.68M–$1.92M
Direct model annual revenue
$960K–$1.2M
Annual gap — middleware capture
BaaS vs. Direct — Full comparison → Calculate your program's gap
Payments Model Strategy → Fix Your Payments Economics → Interchange Explained →