The Interchange Plus Plus pricing model breaks down the card processing charge into three separate fees:
Interchange fee
Card scheme fee
Processing fee
Let's look at these fees in more detail.
Interchange fee
During card transactions‚ the cardholder's bank charges the acquirer for processing the payment. This is known as an interchange fee. The acquirer then includes the interchange fee as part of its payment processing fees‚ passing on the cost to the business using its services.
The interchange fee is determined by a variety of factors‚ including:
Country of card issue
Business location
Type of card used
Type of transaction
Technology used
Security processes
This means that there are hundreds of different rates of interchange fees that a business may have to pay. Most card schemes‚ which are central payment networks‚ and acquirers are required to publish these rates so they can be regulated‚ meaning customers can easily look up the interchange rates for certain types of transactions. However‚ some card schemes‚ such as interregional commercial cards‚ are not required to publish fees.
Card scheme fee
Card schemes (such as Visa or Mastercard) charge the acquiring bank a fee for the use of their systems and networks. This is known as the card scheme fee.
The card scheme fee is determined by a variety of factors‚ including:
Type of card
Type of transaction
Average transaction value
Business location
Security protocols
Authorisation fees
Cross-border transaction fees
Licensing fees
Fraud prevention
Processing fee
The processing fee is the cost that the acquirer/payment service provider charges to the business for using their services. As well as covering the actual costs to process the payment‚ it also includes a markup‚ allowing the acquirer to make a profit on each transaction.
The processing fee can vary a lot between acquirers and may be set based on the level of risk posed by the business. For example‚ high-risk businesses such as gambling companies will be charged more per transaction than low-risk categories such as retailers. This is to make up for the higher chance of transaction failures in more risky industries.
Before we delve into blended pricing‚ let's look at Interchange+‚ a simpler version of Interchange++..