What does Tiered pricing involve?

Tiered pricing involves establishing multiple pricing levels, or tiers, that determine the fees associated with processing transactions based on varying criteria such as transaction volume or type. This pricing model allows merchants to benefit from different rates depending on their sales figures or the specific conditions of the transactions they are processing. For instance, high-volume merchants may qualify for lower rates per transaction under the tiered system, ultimately enhancing their profitability as they engage in more business.

Other pricing models like a flat fee or a percentage of total sales do not take into account the variations in transaction volume or conditions and therefore lack the flexibility and potential cost savings that tiered pricing affords. Tiered pricing can effectively encourage more transactions by providing merchant incentives tied to their performance, making it a strategic choice in the payments landscape.