Deep dive: free spend software

3 min read · Chapter 8 of 10

Is "free" software really free?

My verdict as of October 2026: "free" describes the price of the software and says little about the economics. On card-first platforms the merchant pays 2.5% to 2.7%, the customer gets about 1% to 1.5% back, and the platform's margin depends on losses and on how fast the customer pays. I'd ask any vendor who pays for the software, and what happens to your price if interchange falls.

Who actually funds it

Model	Who pays	How, per public filings
Card-first SMB platform	Merchants, through interchange	Card fees about 2.56% of volume and 41% of revenue; about half returned as rewards
Travel-and-expense suite	Travel suppliers and payment partners	About 90% of revenue from booking fees and commissions; its bring-your-own-card product earns no interchange
Expense software	Customers, per seat	Interchange about 15% of revenue, up 24% in 2025 as paid members fell 5%; card spend buys a seat discount
Closed-loop charge issuer	Merchants, plus card fees	Rewards about half of discount revenue
Accounting vendor's own card	Merchants	2% cash back, underwritten on ledger data; economics not public

Compare carefully: filers book rewards differently (one as a marketing expense, another against revenue), and card volume, billed business and total payment volume are different denominators.

Rebates are priced by settlement speed

A public multi-state card contract pays up to 44 extra basis points for paying the balance within a day, falling one a day to zero at 45 days (procure to pay has the full stack). One public expense company pays 2% cash back above $250,000 of monthly settled spend, 1% below, and offers daily settlement. Say a company puts $500,000 a month on cards: paying daily instead of at month end could be worth up to about $2,000 a month in extra rebate under a contract like that. Settlement speed works as a price that nobody puts on the pricing page, and it's the idea I most want an operator to confirm or kill.

What could change the economics

Visa's enhanced-data program. Validated Level 3 data cuts online corporate interchange from about 2.7% to about 1.75%; one public issuer processor's filing says it "results in lower interchange revenue" for it and its commercial customers.
The merchant settlement. Visa and Mastercard's settlement with merchants, preliminarily approved on June 9, 2026, would let merchants decline credit cards by category, commercial among them, and surcharge more freely (up to the lower of 3% or cost, per one consultancy). It cuts average credit interchange by 10 basis points for five years, but it's unclear whether that reaches commercial cards, and there's no commercial cap. Trade press expects repricing no earlier than October 2027. My guess: hotels and airlines won't refuse corporate cards, but B2B suppliers may refuse or surcharge them, at the company's cost.
The Credit Card Competition Act (S.3623, January 2026) would make banks over $100B in assets enable a second network on credit cards, business cards included; closed-loop cards are exempt. No floor vote yet. I think it would hit big banks' commercial books, not the smaller sponsor banks behind most fintech programs.
Illinois' law barring interchange on tax and tips is blocked by a court for national banks and networks; a delay to July 1, 2027 passed the legislature, and I haven't confirmed it was signed.
Canada and the EU. For contrast, Canada's 2024 cuts cover consumer credit only, so a commercial card costs a small merchant about 2% against under 1% in store for consumer credit. The EU caps consumer cards at 0.2% and 0.3% and leaves commercial cards out; merchants there called for a commercial cap in May 2026.

If interchange fell, every 10 basis points would cost $10,000 a year on a company putting $10M a year on cards, and I'd expect rewards to be cut before anything else: after the Durbin amendment capped debit interchange, debit rewards largely disappeared and banks won back about 30% of the lost revenue through deposit fees (Fed, 2014). Next would come shorter settlement terms, fees on the free tier, and more bill pay, currency and float.

Questions to ask a vendor

What's your revenue mix? Interchange, subscriptions, travel fees, float, add-ons.
What share of interchange do you give back, and how do you book it?
What does my rebate depend on? Volume, settlement frequency, Level 3 data.
Who holds the interchange contract: you, your processor or the bank?
If suppliers surcharge or refuse commercial cards, what happens to my rebate and policy?
Which bank issues the card, and what happens to my card numbers if you change banks?
Who funds my balance until I pay, and what can your funders change?
If interchange falls 10 basis points, what do you change first?