How do the Match.com's and the Amazon's of the world do their payment processing? What kind of bank would handle that volume? Do they own their own banks or something? How do they process all of those credit cards? I'm just curious, technologically speaking. Does anyone have any idea?

I think Amazon uses paymentech

don't quote me on that

A lot go directly thru First Data because of the volume. First Data owns a lot of other companies, like Cardservice, Telecheck, Western Union, Concord are a few that come to mind right now

Yes. I agree with the others here. Big sites like that of which can afford only the top of the line payment processors for high payment volumes. I would not doubt though that they have their own payment processing department through use of merchant account, in addition to outsourcing. Especially with their employment base.

The largest "national accounts" like WALMART, SAM'S CLUB, AMAZON typical use high volume processors like NPC, Paymentech and some of the larger financial institutions who have always specialized in those kinds of merchants.

Typically these merchants will have dedicated VPN connections to the processing networks. Their pricing is usually structured on an Interchange Plus basis due to their substantial financial net worth and processing volume.

For their online processing needs, many of these accounts use CyberSource as their online payment processing conduit if they do not build and manage their own in-house solution.

Naturally, the fixed and recurring costs for many of the above mentioned solutions would be far too expensive for most businesses unless they had transaction volumes on the same order of scale as these aforementioned clients.

I've heard that they are able to get discount rate of around 1.85%

Actually Wal-Mart is a First Data customer. And it also depends Morocco, are we talking online or retail. It is quite possible to get a pretty low rate with a very high volume. I have seen the keyed rate as low as 1.80% on a few clients

I'm actually pretty sure they get a flat 1.85-1.80% interchange rate for their eCommerce. It one of the perks of being able to bring that amount of transactions anywhere.

Out of the many dozens of Interchange categories on Visa and MasterCard, there are just a few that specifically apply to very high volume merchants. The rest are the same for all merchants regardless of their volume and instead are based on business category and other qualification factors.

The series of Performance Threshold Interchange fees are these fees. The three thresholds for the three preferential structures range from $300 million to $2 billion in minimum volume... and that is just for the Visa component.

In addition, merchants on this program are required to maintain a chargeback ratio no greater than 0.018%. (i.e. as contrasted to the normal Visa risk monitoring threshold of 1.000%)

The savings from the above categories primarily serves to benefit the substantially larger portion of "card present" swipe transactions conducted by these retailers.

With respect to Internet/MOTO processing, these same high volume merchants are able to negotiate highly preferential pricing or Interchange Plus programs.

When you account for the mix of credit and check card transactions and providing that there are sufficient downgrade and per transaction costs to ensure a profitable structure, it is certainly possible to get a rate like that if you are a major player.

Of course... it is a different ball game anyways where you are talking about a volume of billions of dollars in processing. The companies are extremely well established in most cases with a high degree of solvency, the risk premiums are lower and the margins are thinner - albeit at a much larger volume multiplier.

The only exception to this "rule of thumb" are the airlines. NPC, for instance, despite being a major player in the industry, quickly abandoned that market with the exception of the airlines it had long term contracts with due to the fact that many of them were on the verge of bankruptcy which represents a huge processing liability.

I was under the impression that NPC still had the WAL-MART contract but if they moved to First Data to reduce their margins below the approx. 3 cent markup they had, I sure wouldn't be surprised.

I guess that "rollback guy" from WAL-MART doesn't just cut down the prices of their products, he also apparently cuts down on their transaction fees for them too, whenever possible. ;)