The Economics of a Basis Point
At scale, one hundredth of a percent is a business model.
By Ravi Iyer
Payment companies do not make money on transactions. They make money on the spread between what they charge and what the rails cost them, multiplied by a volume most people cannot picture.
Why margin compression is structural
Every new entrant competes on price because price is the only thing a merchant can compare on a spreadsheet. The escape is to sell something the spreadsheet does not have a column for.