Basis point (bps)

Payments people quote almost everything in basis points because the numbers involved are small percentages of large volumes. One basis point is 0.01%; one hundred basis points is 1%. A processor markup of “25 bps” means 0.25% of transaction volume; a platform earning “40 bps on processed volume” keeps 0.40 cents of every hundred dollars.

How the math works

The arithmetic is simple but worth internalizing, because basis points on volume is how embedded payments revenue is actually modeled. A software platform whose merchants process $5 million a month, earning 40 bps, makes $20,000 a month ($5,000,000 × 0.0040), or $240,000 a year, growing automatically as merchants grow. An ISO evaluating a residual split does the same math: 15 bps on a $30 million portfolio is $45,000 a month. Going the other direction, if a processor quotes “interchange plus 20 bps plus 8 cents,” a $100 transaction carries $0.20 of percentage markup plus the $0.08 fixed fee on top of pass-through costs.

The unit also keeps small differences visible. The gap between a 2.90% and a 2.65% effective rate sounds trivial spoken aloud, but it is 25 basis points: $2,500 a month on $1 million of volume. Quoting in bps forces precision that “about three percent” hides.

Why it matters

When comparing processors or negotiating a revenue share, insist on quotes in basis points over a defined base (gross volume? net of refunds? card volume only, or ACH too?). Two offers of “40 bps” can differ meaningfully if one is calculated on gross card volume and the other nets out refunds, interchange downgrades, or ACH.

QorPay quotes program pricing and partner economics in basis points on an interchange-plus basis, with the calculation base spelled out per program.