Interchange

Interchange is the fee that moves from the merchant's acquiring bank to the cardholder's issuing bank each time a card is used. It is set by the card scheme, not negotiated between the parties, and it is the main reason card issuing can be a revenue-generating product rather than a cost centre.

Who pays and who receives

The merchant pays a merchant service charge to their acquirer. Interchange is the largest component of that charge, and it is passed to the issuer. If you run a card programme, some share of that interchange flows to you — how much depends on your arrangement with your BIN sponsor and processor, and it is one of the most consequential commercial terms in a card deal.

The European caps

In the EEA and the UK, interchange on consumer cards is capped by regulation: broadly 0.2% for consumer debit and 0.3% for consumer credit. Commercial cards are not covered by those caps, which is why business card programmes have materially better economics than consumer ones — and why so many embedded finance products target spend management rather than consumer wallets.

Rates outside Europe differ enormously; US interchange is uncapped for most issuers and multiples higher.

What affects the rate you actually earn

• Card type — consumer debit, consumer credit, commercial, prepaid.
• Presence — card-present transactions attract different rates from card-not-present.
• Region — domestic, intra-regional and inter-regional rates all differ.
• Merchant category — some categories carry their own rates.
• Scheme fees — deducted from the gross interchange, along with your processor's and sponsor's share.

The question to ask

Not "what is interchange?", but "what is my net interchange, after scheme fees, sponsor share and processor share, on my expected transaction mix, in my markets?" Providers quote gross rates readily and net rates reluctantly. The net number is the one that goes in your model.