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Interchange++ (IC++) Explained

What is interchange plus plus rate structure, with examples

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What is Interchange?

Interchange is the percentage fee that merchant's bank (acquirer) has to pay to the customer's card issuing bank whenever a customer uses a credit/debit card. This fee is paid for the benefits of accepting payments and covers handling costs including the risk involved in processing/settling the transaction.

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 three component format. Firstly, the basis is the interchange percentage fee, on top of which a card scheme fee is added and lastly a constant margin is added. Sum of these three fees is the a final rate that the merchant is being charged with. The benefit of such pricing model over the Blended Rate model is full transparency and thus lower fees overall.

Final rate is a sum of 3 components:

Interchange Fee: Percentage fee charged to the acquirer by the cardholder's card issuing bank. Interchange fees are published on Card Associations websites (see Useful Links). The factors that determine these fees are the 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 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 charging non-EU issued cards, the interchange fee can be as high as 2.00%.

Card Scheme Fee: First "plus"; this is a fee charged to the acquirer by the Card Associations (Visa, MasterCard) for using their network. These fees are typically lower than interchange raging from 0.10% up to 0.65% for e-commerce and MOTO Visa/MasterCard 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.

Processing Fee: Second "plus"; a margin added by the acquirer or payment provider (processor) for providing card processing services. This is the profit that they take and it can determine if one provider can offer lower rates than the other and varies mostly based on risk assessment 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.

E-com/MOTO Interchange and Card Scheme Fees

Visa/MC EEA Interchange Fee
Domestic/Regional Debit
0.20%
Domestic/Regional Credit
0.30%
Corporate Cards
1.25% - 1.90%
International Cards
1.50% - 2.00%
Visa/MC EEA Card Scheme Fee
Domestic Credit/Debit
0.02% - 0.12%
Regional Credit/Debit
0.02% - 0.15%
International
0.55% - 0.65%

Interchange++ Examples

Case #1
UK based low-risk merchant accepting e-commerce & MOTO. All cards are issued in EEA.
Interchange: 0.20% - 0.30%
Card Scheme Fee: 0.02% - 0.15%
Processing Fee: 1.00%
Final Max Rate: 1.45%
Case #2
EU based merchant processing MOTO b2b payments within EU. Mostly corporate credit cards.
Interchange: 1.25% - 1.90%
Card Scheme Fee: 0.02% - 0.15%
Processing Fee: 1.00%
Final Max Rate: 3.05%
Case #3
UK based high risk merchant selling to mostly US based clients with consumer cards.
Interchange: 1.50% - 2.00%
Card Scheme Fee: 0.55% - 0.65%
Processing Fee: 1.00%
Final Max Rate: 3.65%

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