Basis Points — often abbreviated as bps, bp, or bips — are a unit of measure used in the financial sector to describe the percentage change in a financial instrument. In the payment processing industry, basis points are commonly used to express the fees charged for transactions.
One basis point is equivalent to 0.01% (or 0.0001 in decimal form). If a merchant is charged 200 basis points on a transaction, they are being charged a fee of 2% of the transaction value.
Basis points provide an easy way to express small percentages and are commonly used when discussing changes to interest rates, equity indexes, and the cost of a transaction for payment processing.