Interchange fees explained: A merchant's guide to payment pricing
Interchange fees are one component of a three-layer cost structure that most merchants pay without fully understanding. This guide, drawn from a Pay Attention podcast episode with Fibonatix CEO Tal Miller and TORUS CEO Kirill Lisitsyn, breaks down how interchange, scheme fees, and acquirer markups interact, and what UK and EEA merchants can do to gain control over their processing costs.
Updated June 12, 2026
AI Summary
Key takeaways
- Merchant pricing breaks down into three distinct layers (interchange fees, scheme fees, and the acquirer markup), and conflating them makes it impossible to identify where costs can be reduced.
- Interchange-plus pricing is only as transparent as your ability to verify the scheme fees being passed through; without transaction-level data, it can be just as opaque as a blended rate.
- Scheme fees are the hardest cost layer to track because they consist of hundreds of individual line items, updated regularly by Visa and Mastercard, that even acquirers often struggle to fully reconcile.
- Visa and Mastercard are integrating new payment methods into their existing rails, which expands merchant options but risks adding further complexity to a fee structure that regulators are already scrutinising.
Every card transaction carries a cost that most merchants pay without fully understanding it. In this episode of the Pay Attention podcast, Fibonatix CEO Tal Miller and Kirill Lisitsyn, CEO and co-founder of TORUS, unpack the mechanics of interchange fees and the pricing structures built around them.
This guide distils the key insights from that conversation, covering how interchange fees work, what drives their cost, and what the push toward greater transparency means for merchants processing payments in the UK and EEA.
What are interchange fees?
An interchange fee is the amount an acquiring bank pays to the issuing bank each time a cardholder completes a purchase. It exists to compensate the issuer for the cost and risk of processing the transaction and extending credit.
Interchange is, however, only one component of what a merchant actually pays. Merchant pricing sits across three distinct layers:
- Interchange fees: Paid by the acquirer to the issuer; regulated for consumer cards in the EEA, but unregulated for commercial cards.
- Scheme fees: Charged by Visa and Mastercard to both issuers and acquirers; highly complex, with thousands of individual line items and frequent rulebook changes.
- Acquirer markup: The margin added by your payment service provider on top of interchange and scheme fees.
Understanding each layer separately is essential for any merchant that wants to assess accurately what it pays per transaction.
How interchange fees work
When a cardholder pays at checkout, the transaction moves through a four-party system: the cardholder's issuing bank, the card network (Visa or Mastercard), the merchant's acquiring bank, and the merchant. The acquirer settles the transaction with the merchant and pays the interchange fee to the issuer via the card network.
The rate the acquirer pays—and ultimately passes on—depends on several factors: the type of card used, the transaction method (card-present or card-not-present), and the merchant's category code. Regulated consumer card rates in the EEA are capped under the Interchange Fee Regulation (IFR). Commercial cards fall outside that cap and typically attract higher fees.
Interchange fee examples
The table below illustrates how interchange rates can vary by card type and transaction method. Exact rates are set by each card scheme and reviewed periodically.
Card type | Transaction type | Indicative rate |
|---|---|---|
Consumer debit (EEA) | Card-present | Capped at 0.2% |
Consumer credit (EEA) | Card-present | Capped at 0.3% |
Commercial credit | Card-present | Uncapped; typically higher |
Consumer credit | Card-not-present (e-commerce) | Above card-present rate; varies by scheme |
Commercial cards and card-not-present transactions both attract rates above the IFR consumer caps. For merchants in sectors where corporate purchasing or online-only transactions dominate, this distinction materially affects processing costs.
Why scheme fees are so hard to track
Scheme fees—charged by Visa and Mastercard on both issuers and acquirers—are where merchant pricing becomes genuinely opaque. Unlike interchange, scheme fees are not subject to regulatory caps. They consist of hundreds of individual line items covering services, programmes, and network infrastructure, and both schemes update their schedules and rulebooks regularly.
The practical consequence is that even acquirers can struggle to fully reconcile what they pay in scheme fees on any given transaction. Kirill Lisitsyn, CEO of TORUS, describes the system as a "multi-dimensional matrix" in which the complexity itself obscures the true cost. For merchants, this creates a pricing environment where the numbers on a statement are difficult to challenge or verify without granular transaction data.
Gaining negotiating power in this environment requires a specific kind of data capability: a transaction-level understanding of your card mix and how individual transaction types map to fee categories.
Blended rate vs. interchange-plus pricing
The pricing model your acquirer offers determines how much of this complexity appears on your statement.
A blended rate consolidates interchange, scheme fees, and acquirer markup into a single fixed percentage per transaction. It offers predictability and simplicity, but it provides no visibility into the underlying cost components.
Interchange-plus (I++) pricing passes interchange and scheme fees through at cost and adds a fixed acquirer markup separately. In principle, this is more transparent. In practice, the scheme fee component can remain a black box even under I++—because unless a merchant can independently verify the scheme fees being passed through, the model's transparency advantage is limited.
Model | How it works | Transparency | Risk for merchant |
|---|---|---|---|
Blended rate | Fixed % per transaction; all costs bundled | Low | Overpaying in low-cost transaction periods |
Interchange-plus (I++) | Interchange + scheme fees at cost, plus fixed markup | Medium to high | Scheme fee pass-through difficult to verify without data |
The right model depends on transaction volume, card mix, and the merchant's capacity to interrogate the underlying data. Neither model is automatically better.
Interchange fees in the UK and EEA
Within the EEA, consumer card interchange fees are capped under the EU IFR: 0.2% for debit cards and 0.3% for credit cards. These caps apply to consumer cards only. Commercial cards, corporate purchasing cards, and cards issued outside the EEA are not subject to the same limits and typically attract higher rates.
The UK retained equivalent interchange fee caps following the end of the Brexit transition period. Merchants processing cross-border transactions—where the issuing bank sits outside the UK or EEA—may face higher interchange rates. Scheme fees operate outside these caps entirely and have grown as a proportion of total processing costs, a trend now attracting regulatory scrutiny on both sides.
What's changing in interchange and scheme fees
The structure of card payment costs is not static. Several developments are reshaping the landscape:
- Visa and Mastercard are integrating new payment methods into their existing rails, including account-to-account (A2A) payments and buy now, pay later (BNPL). This expands options for merchants but adds further fee categories to an already complex structure.
- Regulatory scrutiny of scheme fees is increasing. While interchange is capped for consumer cards, scheme fees have grown substantially and are coming under closer examination by regulators in the UK and EU.
- Data-driven reconciliation is becoming a competitive advantage. Merchants that map each transaction to its scheme fee category gain the insight needed to negotiate more effectively and identify where costs can be reduced.
The overall direction is toward greater transparency. The structural complexity will not disappear quickly, but merchants that build data capability now will be better positioned as the landscape continues to evolve.
Turn fee complexity into negotiating power
Interchange fees are one part of a three-layer cost structure that most merchants pay without fully understanding. The system's complexity—spanning regulated consumer rates, unregulated commercial card fees, and opaque scheme fee schedules—is structural, and navigating it effectively requires visibility into your own transaction data.
The movement toward greater transparency is real, but gradual. Merchants that invest in data reconciliation now, and work with payment service providers willing to provide genuine cost breakdowns, are better placed to manage processing costs as the regulatory and competitive landscape continues to shift.
Disclaimer: Fibonatix is a UK-based, FCA-regulated payment service provider (FRN 768776) specialising in merchant accounts for B2C businesses globally, but B2B exclusively to the UK and EEA. Verify our regulatory status on the FCA Financial Services Register.
FAQs
What are interchange fees?
An interchange fee is a charge paid by an acquiring bank to an issuing bank every time a cardholder completes a card payment. It forms one component of the total cost a merchant pays per transaction, alongside scheme fees and the acquirer's markup.
Who sets interchange fees in the UK and EEA?
Visa and Mastercard set interchange rates for their respective networks, subject to regulatory caps for consumer cards. The EU IFR caps consumer debit at 0.2% and consumer credit at 0.3%, and the UK maintains equivalent caps.
What is a typical interchange fee example for a UK merchant?
For a standard consumer debit card transaction processed within the EEA cap, the interchange fee is 0.2% of the transaction value. Commercial cards and cross-border transactions are not subject to the same cap and will typically cost more.
Why are scheme fees so hard to track?
Scheme fees consist of hundreds of individual line items set by Visa and Mastercard, updated frequently, and applied differently depending on transaction type, card type, and geography. Even acquirers often cannot fully reconcile them, which makes independent verification by merchants difficult without granular transaction data.
Do commercial cards cost more for merchants than consumer cards?
Yes. Consumer card interchange fees are capped under the IFR in the EEA and under equivalent UK regulation, but commercial cards fall outside those caps and typically attract higher interchange rates.
What is the difference between blended rate and interchange-plus pricing?
A blended rate bundles all fee components into a single fixed percentage, offering simplicity but no cost visibility. Interchange-plus separates the interchange and scheme fee pass-through from the acquirer's markup, which is theoretically more transparent, but only if the merchant has the data capability to verify the scheme fee component.
Can new payment methods like A2A and BNPL simplify the fee ecosystem?
Not necessarily in the short term. Visa and Mastercard are integrating A2A and BNPL within their existing rails, which adds further fee categories to an already complex structure. Over time, increased competition from alternative payment methods may create downward pressure on overall costs.
Are interchange fees capped in the UK and EEA?
Consumer card interchange fees are capped in the EEA under the EU IFR (0.2% debit, 0.3% credit) and under equivalent UK regulation. Commercial cards, corporate cards, and cards issued outside these regions are not subject to the same limits.
