Interchange fees: What they are and how they work

Payment card processing comes with three fees:

– Acquirer markup: Charged by the acquirer for acquiring the funds from your shopper

– Card scheme fees: Charged by the card scheme for using its network

– Interchange fee: Charged by the cardholder’s bank

Interchange fees make up the most significant chunk of card processing fees.

🔹 How much are interchange fees?

On average, interchange fees are around 0.3-0.4% of the transaction amount in Europe and 2% in the US.

Card schemes determine interchange fees and are non-negotiable. They are also regularly adjusted.

The most accurate and up-to-date way to find the current rates is to check the card scheme’s website.

Some card networks, including American Express and Discover, work slightly differently to Visa and Mastercard and don’t publish their rates online.

🔹 Interchange++ vs. Blended pricing

Interchange++ (or Interchange Plus Plus) and Blended are the most widely used pricing models for card transactions. The main difference between the two is transparency.

Interchange++ shows you a detailed breakdown of the three payment card costs mentioned earlier: the acquirer markup, card scheme fee, and interchange fee.

You only pay the interchange fee the card issuer actually charged you. As interchange fees vary depending on many factors, they can sometimes be lower than a fixed rate.

The alternative to Interchange++ is Blended pricing. The Blended model charges an average processing cost plus a fixed markup. You're charged the same markup for every transaction, and you can't see the split of the costs.

This makes it easy to understand, but intransparent. And there's no guarantee your processor will share any savings with you made from lower interchange fees.

🔹 Interchange fees regulation

Traditionally, there was very little transparency into how interchange fees were calculated. Large businesses with a high volume of transactions could negotiate lower fees, while smaller firms had to pay the full amount.

Markets dominated by the large international card schemes were most vulnerable. Businesses couldn't afford to refuse the payment methods most of their customers used.

Fortunately, recent progress has been made to standardize interchange fees, with stricter rules and fee caps introduced, and overall transparency increased.

Source Adyen