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Let’s break this down.<\/p>\n\n\n\n
First, the card networks did<\/em> increase interchange.<\/p>\n\n\n\n A lot of Toast merchants were on flat rate pricing, meaning that they were paying 2.4% and 15 cents per transaction or similar; when the networks increase interchange Toast legitimately experiences an increase in processing COGS that they can’t readily pass through given the flat rate structure (but don’t cry for Toast: they’re making 55 bps on their average merchant).<\/p>\n\n\n\n In this case we can see Toast wanting to recoup some of that margin by increasing flat rates to their merchants. This will be a constant game of whack a mole for Toast (thought not in a bad way if you’re a Toast investor) and don’t ever expect Toast to decrease<\/em> rates even if the card networks do (as they’ve been legislated to do so in like 37 countries now).<\/p>\n\n\n\n Second, Toast is really<\/em> careful not to call the $0.99 customer fee a surcharge. Instead, Toast is using a euphemism to escape any of the legal ramifications<\/a> that come with surcharging legislation… but is there a euphemism for rape? Like, really? <\/p>\n\n\n\n We don’t think Toast is fooling anyone here.<\/p>\n\n\n\n Third, we’re shocked that Toast didn’t find a way to push more merchants into surcharging. Because the math works great for Toast.<\/p>\n\n\n\n On a $10 transaction today, Toast is pulling in roughly 55 basis points, or $0.055. <\/p>\n\n\n\n But if the merchant surcharges $0.99 on $10 check, Toast goes from $0.055 in payments margin to about $0.75.<\/p>\n\n\n\n Not a typo: <\/p>\n\n\n\n Even better, that merchant who’s struggling to sack away $0.30 on that $10 check can sleep soundly at night knowing that they’re toiling 90-hour weeks so Toast can make 2.5x as much as they are by working 0 hours.<\/p>\n\n\n\n We ran all that math in a previous article<\/a> if you’re curious how this plays out for varying check sizes. <\/p>\n\n\n\n At least previous Toast communications offered Toast merchants some<\/em> of that surcharging gravy back to their bank accounts. But apparently that was too much for Toast, who saw this year’s Nobel Peace Price<\/a> go to someone not named after a piece of crusted bread.<\/p>\n\n\n\n So Toast merchants can either instantly lose more money working with Toast, or roll the dice in pissing off their customers, which lose them money over the long run.<\/p>\n\n\n\n Talk about a partnership.<\/p>\n\n\n\n Looks like Toast merchants are in for a rough 2023: if Toast can triple payments rates on their customers during a pandemic, ratchet their payments margins on their customers by 1,270% at the beginning of a recession, we’d hate to be a Toast merchant when stagflation is obvious. <\/p>\nToast makes literally 1,270%+ more money by doing absolutely fuck all.<\/h4>\n\n\n\n