Payments and fintech
Basis points (bps)
One hundredth of a percent: 100 basis points make 1 percent.
Last reviewedWhat does Basis points (bps) mean?
A basis point is 0.01 percent, so 100 basis points equal 1 percent. Finance people use basis points to talk about small rates and changes precisely. Example: if a fee falls from 1.25 percent to 1.10 percent, it has fallen by 15 basis points. Saying it fell by "0.15 percent" could be confused with a relative change, so basis points are clearer, in the same way that percentage points are clearer than percent. Payment fees, bank margins, fund fees and interest rate moves are usually quoted in basis points.
Where does it come up in case interview prep?
- Bank unit economics: is a loan worth making?Lesson in Retail and commercial banking
- How payments work: cards, real-time payments, wallets, BNPL, and remittancesLesson in Payments and fintech
- Payments unit economics: what one transaction earnsLesson in Payments and fintech
- How asset and wealth management worksLesson in Asset and wealth management
- Asset and wealth unit economics: fee rates, mix, and the AUM bridgeLesson in Asset and wealth management
Related terms
- Percent versus percentage pointsA change in a rate is measured in points; its relative change in percent.
- Take rateThe share of each transaction's value that a platform keeps as revenue.
- Net interest margin (NIM)What a bank earns on its loans and investments after paying for its funding, as a share of those assets.
- Interchange feeThe fee the merchant's bank pays the cardholder's bank on each card payment.
- Merchant discount rate (MDR)The total fee a merchant pays to accept a card or digital payment.
- IssuerThe bank or firm that gives a customer a card and, for credit cards, takes the credit risk.
- AcquirerThe bank or firm that lets a merchant accept card payments.
- Card scheme (card network)The network that sets the rules and connects issuers and acquirers, such as Visa or Mastercard.