6 Questions
What is the estimated interchange cost for all of Alma today?
31 bps
What are the two components that make up the mark-up of the PSP?
Variable fees and fixed fees
What is the transaction margin of TPV?
4.07€
How much is the risk loss?
0.47%
What are the costs for payouts?
1.38€
What is the cost of cash?
0.46%
Study Notes
- We pay processing costs to third parties called payment service providers (PSPs) like Stripe, Adyen, and Checkout.com which are our current partners.
- These third parties allow us to collect the money from our end customers’ cards.
- These costs are composed of :
- The mark-up of the PSP, - i.e. their margin, the money they make for providing this service - which is composed of :
- Variable fees (X% on the total amount of the transaction)
- Fixed fees (Y€ for each transaction, so for a P4X Alma pays 4*Y€)
- NB: the smaller the average basket of the merchant is, the more it will cost us because the fixed costs remain the same.
- The network costs (Visa, Mastercard, CB) which are composed of :
- The interchange (different depending on the type of card used: debit, credit, commercial, business, French, foreign, etc.)
- The scheme fees (full of different costs depending on whether there is a 3DS, or other stuff).
- PSPs charge these fees to Alma but are themselves charged these fees by card networks like Visa & Mastercard. We have estimated this interchange cost today for all of Alma to be around 31 bps (depending on the mix of cards our end customers use).
- Cost of cash = 0.46% or 1.38€ (14% of the fees)
- Risk loss = 0.47% or 1.42€ (14% of the fees)
- Other costs = (a) Payouts costs
- (b) KYC costs
- (c) Variable ops costs
- TPV is 300€ and commissions are 3.40% of TPV, resulting in 10.20€ of revenue
- Costs are 2.04% of TPV, resulting in 6.12€ of expenses
- Transaction Margin is 1.36% of TPV, resulting in 4.07€ of profit
Learn about the breakdown of processing costs incurred by payment service providers (PSPs) like Stripe, Adyen, and Checkout.com. Explore the components including mark-up fees, network costs (interchange and scheme fees), as well as additional costs like cost of cash, risk loss, and other operational expenses.
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