System and method for assigning an initial transaction fee tier to a vendor in a payment system with a variable transaction fee

Abstract

A system makes payments from a payer to a vendor and assesses a variable transaction fee to the vendor. The system comprises a database which associates, for each of a community of payers, identification a rate tier assigned to each vendor to which the payer makes payment. A tier assignment application determines a tier to assign to a vendor by determining: i) an industry sensitivity score based on the type of business the vendor operates; ii) a payer centric spend score; iii) a payer centric frequency score; iv) a network spend score; and iv) a network frequency score. The tier assigned to the vendor is a function of these scores. A payment application, when making payment from the payer to the vendor, determines a transaction fee to apply to the payment by multiplying the payment amount by a transaction rate associated with the tier assigned to the vendor.