Understanding interchange fees: definition and role in the payments ecosystem
Interchange fees, sometimes referred to as interchange commissions, are a fundamental part of the card payment system. They are fees charged on each card transaction and paid by the merchant’s bank, known as the acquiring bank, to the cardholder’s bank, known as the issuing bank.
These fees compensate the issuing bank for several essential services. They cover the costs of issuing and managing payment cards, the financial risk associated with extending credit or guaranteeing payment, and the funding of fraud prevention programmes and card network maintenance.
In practical terms, when a customer pays €100 by card in your store, an interchange fee of €0.20, or 0.2%, is transferred from your bank to your customer’s bank. Interchange fees are set by card networks such as Visa and Mastercard, and by domestic card schemes where applicable, but their levels are strictly regulated under European legislation.
Interchange fee rates in Europe: a strict regulatory framework
Since 2015, the European Interchange Fee Regulation (IFR) 2015/751 has capped interchange fees for consumer cards. The aim of this regulation is to protect merchants from excessive fees while maintaining balance within the payments ecosystem.
The caps are clearly defined based on card type. For debit cards, interchange fees are limited to a maximum of 0.2% of the transaction amount. For credit cards, the cap is set at 0.3%.
These limits apply uniformly across all European Union member states, creating a harmonised payments market. In France, data published by INSEE, which collects and aggregates card payment statistics, shows that actual rates are generally close to these regulatory caps, offering merchants a high level of cost predictability.
However, this regulation does not apply to commercial or corporate cards. For these cards, interchange fees are freely set by the card networks. As a result, fees can reach up to 0.9% for CB business cards and between 1.3% and 2% for Visa or Mastercard corporate cards.
How interchange fees are calculated: key determining factors
Interchange fee calculation is based on several factors that directly influence fee levels. Understanding these factors helps merchants anticipate costs and optimise their payment mix.
The first factor is the type of card. Debit cards generally benefit from lower rates than credit cards. Consumer cards are subject to regulatory caps, whereas business and corporate cards are not.
Geography also plays a major role. Transactions are typically classified into three categories: domestic transactions, where the card and merchant are in the same country; intra-EU transactions, within the European Union; and extra-EU or international transactions. Domestic transactions benefit from preferential rates, while costs increase for intra-EU transactions and rise further for international payments. For merchants selling internationally, this distinction can have a significant impact on costs.
How interchange fees impact your business and transaction costs
Interchange fees represent a significant share of payment costs, but they are only one component of the overall pricing structure offered by payment service providers.
In practice, merchants are usually charged an all-inclusive rate that combines interchange fees, the provider’s own margin and, in some cases, network fees. This model simplifies cost management while providing clear visibility.
Several levers can help optimise costs. Analysing your card mix may reveal savings opportunities, such as encouraging debit card usage over credit cards or limiting acceptance of high-cost corporate cards for large amounts.
Optimising the payment journey also plays a role. A smooth checkout reduces cart abandonment and improves conversion rates, increasing overall profitability despite unavoidable fees.
Differences between card networks: understanding pricing specificities
Not all card networks apply the same pricing rules. Understanding these differences allows merchants to optimise their payment mix and anticipate costs more accurately.
The CB network complies strictly with European caps, applying rates of 0.2% for debit cards, 0.3% for credit cards and up to 0.9% for commercial cards. This predictability is a key advantage for French merchants.
Visa and Mastercard apply the same capped rates for consumer cards in line with European regulation. However, their corporate cards are subject to variable rates ranging from 1.3% to 2%, depending on the card segment and issuing country. This variability can significantly affect costs for high-value B2B transactions.
American Express follows a different model, as it acts both as a card network and an issuing bank. Fees are often higher and are not subject to regulatory caps, which explains why some merchants limit acceptance or apply specific conditions for these cards.
The card network and the type of card, whether consumer, business or premium, directly influence pricing. Understanding these elements helps merchants adapt acceptance strategies based on customer profiles and margins.
Industry-specific factors: when your business activity affects costs
The merchant category code, or MCC, directly impacts interchange fee levels by reflecting the risk associated with each type of business.
Supermarkets and food retail typically benefit from lower rates due to high transaction volumes, moderate average basket sizes and lower fraud risk.
Travel, mobility and leisure sectors often face higher rates. Larger transaction amounts combined with increased fraud exposure, such as remote bookings and frequent cancellations, justify these adjustments.
Digital services are also subject to higher interchange fees. The absence of physical card presentation in online transactions increases perceived risk for issuers, resulting in higher costs for merchants.
These sector-specific realities highlight the importance of choosing a payment provider that understands your business and can negotiate the most appropriate conditions.
Concrete examples: measuring the impact on revenue
To illustrate the impact of interchange fees, consider several scenarios based on a €150 transaction.
A consumer debit card at 0.2% generates €0.30 in interchange fees. A consumer credit card at 0.3% results in €0.45. A CB business card at 0.9% generates €1.35, while a Visa or Mastercard corporate card at rates between 1.3% and 2% leads to fees between €1.95 and €3.00. For online Visa transactions, fees may range from 0.3% to 1.5%, or €0.45 to €2.25.
Take the example of a small travel business with an average basket of €500. If 20% of transactions are paid using foreign premium cards charged at 2%, this represents an additional cost of €10 per transaction compared to a domestic debit card at €1. Across 1,000 such transactions per year, the difference amounts to €9,000.
This example clearly illustrates the importance of understanding card mix and optimising acceptance strategies.
Interchange fees in an international context
International expansion adds complexity to interchange fee management. Outside the European Union, rates vary widely and often exceed European standards.
In North America, interchange fees can exceed 1.5% for certain transactions, particularly premium cards and online purchases. This difference is largely due to the absence of strict regulatory caps.
In some jurisdictions, no limits exist at all, leaving networks free to set pricing. This contrasts with the predictability offered by the European IFR regulation, which provides merchants with a stable cost framework.
Cross-border transactions are also subject to additional mark-ups to cover increased risk and currency conversion costs. These extra charges can significantly affect international sales profitability.
Strategies to control interchange fees
Managing interchange fees requires a combination of complementary approaches.
Innovative payment solutions such as payment links or Buy Now Pay Later options like Klarna or PayPal Pay in 4 can offer alternatives for certain use cases, sometimes with more favourable cost structures.
Diversifying payment methods intelligently can also help. Offering multiple options allows merchants to guide customers towards lower-cost solutions. Digital wallets such as PayPal, Google Pay or Apple Pay facilitate card payments through a secure and frictionless experience. While they do not reduce mandatory interchange fees on card transactions, they can help lower ancillary costs and improve conversion rates, positively impacting profitability, especially for smaller transactions.
Monext expertise: helping you optimise payment costs
At Monext, we understand that every cent matters. Our approach combines pricing transparency with personalised support to help merchants control interchange fees effectively.
We offer clear, predictable pricing where interchange fees are integrated into a transparent overall rate. This eliminates hidden costs and simplifies budget management.
Our experts support merchants across all sectors, from retail and travel to events and digital services, analysing transaction mix to identify optimisation opportunities.
Detailed reporting tools provide real-time visibility into payment costs, enabling informed strategic adjustments. Continuous innovation, from multi-card payments to optimised recurring billing, helps merchants reduce costs while improving customer experience.
Monext goes beyond providing a technical solution. We act as a strategic partner, helping merchants optimise payment costs sustainably while delivering the best possible experience to their customers.
