Interchange++ (IC++), with examples

What is an interchange plus plus rate structure?

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What is Interchange?

Interchange is a percentage fee which the merchant service provider has to pay to the cardholder's issuing bank whenever they use their credit or debit card. This fee is paid for the benefits of accepting payments and covers handling costs including the risk involved in processing and settling the transaction.

Visa/MC EEA Interchange Fees
Domestic/Regional Debit
0.20%
Domestic/Regional Credit
0.30%
Corporate/Premium Cards
1.25% - 1.90%
Cards issued outside EEA
1.50% - 1.80%
Visa/MC EEA Card Scheme Fees
Domestic Credit/Debit
0.02% - 0.12%
Cards issued within EEA
0.02% - 0.15%
Cards issued outside EEA
0.55% - 0.65%

Paying high fees?

Stop paying more than you should. In 2016 the EU commission has capped the interchange fees. With its network of banking partners MerchantScout is able to beat your current pricing for EEA based businesses.

What is Interchange Plus Plus fee structure (IC++)?

All MerchantScout's preferred banking partners in EU/UK are able to provide interchange plus plus structure, which refers to a pricing model where the acquirer or payment provider will charge a merchant, for every card transaction, using a rate made of three components. Firstly, the basis is always the interchange percentage fee. On top of that, a card scheme fee is added, and lastly a fixed percentage is added by the provider. Sum of these three fees is the final rate that the merchant is being charged with for every transaction. The benefit of such pricing model over the fixed blended rate model is full transparency and thus normally results in lower overall fees.

Final rate is a sum of 3 components:

1) INTERCHANGE FEE:

Percentage fee charged to the acquirer by the cardholder's card issuing bank. There are over 100 variations of interchange fees possible. These fees are published on Card Scheme websites (such as Mastercard and Visa). The factors that determine the interchange fee are: transaction type (card-present or card-not-present); type of card used (consumer, corporate, specific type card) and most importantly the country location of merchant and location of card issuing bank. For example, the Visa interchange fee for a UK merchant selling online to UK or EU cardholders is as low as 0.20%, whereas if the same merchant would sell internationally to non-EU issued cards, the interchange fee can be as high as 1.80% (Q3 2018).

2) CARD SCHEME FEE:

First "plus"; this is a fee charged to the acquirer by the Card Scheme (Visa, MasterCard) for using their network. These fees are typically lower than interchange ranging from 0.10% up to 0.65% for e-commerce. POS and MOTO transactions. Same as interchange fee, the card scheme fee is based on transaction type, card type and geographical relation between merchant and cardholder's issuing bank.

3) PROCESSING FEE:

Second "plus"; a margin added by the acquirer or payment provider (processor) for providing card processing services. This is the source of profit for providers, meaning these can vary from one to other. It is mostly based on provider's risk exposure and merchant's MCC category code (High Risk MCC List). Rule of thumb with many providers is to charge a 1.00% markup (100 basis points), however with high volume merchants or lower risk categories this fee can usually go down to 0.50% or less.

Interchange++ Examples

Case #1
UK low-risk e-commerce & MOTO merchant. All clients from EU/UK.
Interchange: 0.20% - 0.30%
Card Scheme Fee: 0.02% - 0.15%
Processing Fee: 1.00%
Final average rate:
1.40%
Case #2
EU merchant processing MOTO b2b payments in EU. Corporate credit cards.
Interchange: 1.25% - 1.80%
Card Scheme Fee: 0.02% - 0.15%
Processing Fee: 1.00%
Final average rate:
2.70%
Case #3
UK high risk merchant selling US clients with consumer cards.
Interchange: 1.50% - 2.80%
Card Scheme Fee: 0.55% - 0.65%
Processing Fee: 1.00%
Final average rate:
3.50%

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