What a processing fee is made of
- Interchange: paid by the acquirer to the card's issuer
- Scheme fees: paid to the card network for the use of its rails
- Acquirer or PSP margin: the provider's own price
EU law has its own name for the total. The Interchange Fee Regulation defines the merchant service charge as a fee paid by the payee to the acquirer in relation to card-based payment transactions (Article 2).
How processing fees are priced
Under blended pricing, the merchant pays one rate for every card. Under interchange-plus-plus pricing, the merchant pays the actual interchange and scheme fees of each payment, plus a stated margin.
In the EU, Article 9 of the Interchange Fee Regulation makes separate pricing the default. An acquirer offers and charges merchant service charges individually specified for different categories and brands of cards with different interchange fee levels, unless the merchant asks in writing for blended charges.
Why processing fees matter to a payments business
For a PSP, the margin is the revenue, and interchange and scheme fees are costs passed through, so the ledger records each part of every payment separately. Fees also vary by card: a consumer debit card issued in the same country costs less to accept than a commercial card from another continent. Routing and local acquiring are the usual levers on that cost.
Processing fee, interchange or transaction fee?
- Interchange
- One component of the processing fee, received by the card's issuer. The merchant's provider does not keep it.
- Merchant discount rate
- The processing fee expressed as a percentage of the payment, deducted before the merchant is paid.
- Transaction fee
- Any charge made per transaction. A processing fee is the transaction fee a merchant pays for acceptance.
Where a processing fee shows up in a platform
Modules that do the work
- Card acquiringCard acceptance on the phone, in store and online, through the acquirer you choose.
- LedgerThe double-entry book of record behind every balance, fee and transfer.
- Analytics & monitoringProduct analytics, attribution, engagement and crash reports, on a tracking plan you control.
Platforms that need it
Where it is written
The laws and standards this page's facts come from.
General information, not legal advice: what applies to you depends on your services and your market.