Interchange Fee
Definition
A fee paid by the acquiring bank to the issuing bank each time a payment card transaction is processed, representing the largest component of the merchant discount rate. Interchange fees are set by card networks (Visa, Mastercard) and vary by card type, merchant category, transaction method (card-present vs card-not-present), and jurisdiction. EU interchange fees are capped at 0.2% for debit and 0.3% for credit consumer cards under the Interchange Fee Regulation (2015/751). In the US, the Durbin Amendment caps debit interchange for large issuers.
Complementary Terms
Concepts that frequently appear alongside Interchange Fee in practice.
The total fee charged to a merchant for processing a payment card transaction, expressed as a percentage of the transaction value plus a fixed per-transaction fee. The MDR comprises three components: the interchange fee (paid to the issuing bank), the card network assessment fee (paid to Visa/Mastercard), and the acquirer's markup.
A financial institution licensed by card networks (Visa, Mastercard) to process payment card transactions on behalf of merchants, also known as a merchant acquirer. The acquiring bank maintains the merchant's account, underwrites the merchant's credit risk, settles funds from card transactions, and ensures compliance with card network rules and PCI DSS security standards.
A financial institution licensed by card networks to issue payment cards (credit, debit, or prepaid) to consumers and businesses. The issuing bank extends credit or provides access to deposited funds, bears the cardholder's credit risk, and receives interchange fees on each transaction.
The end-to-end handling of electronic payment transactions from initiation through authorisation, clearing, and settlement. Payment processing involves multiple parties — merchants, payment gateways, acquiring banks, card networks, issuing banks, and payment processors — coordinating in real time to validate, authorise, and settle funds.
A technology service that authorises and processes electronic payment transactions between merchants and acquiring banks or payment processors. Payment gateways encrypt sensitive payment data, route transactions to the appropriate card networks, and return authorisation responses in real time.
A regulatory authorisation granted to financial technology companies permitting them to offer specific financial services such as payments, lending, investment management, or insurance. Licencing requirements vary by jurisdiction and activity — in the UK, the FCA regulates fintech firms under frameworks including the Payment Services Regulations, the Electronic Money Regulations, and the FCA Regulatory Sandbox.
The EU directive (2015/2366) that regulates payment services and payment service providers, mandating strong customer authentication, open banking through account access APIs (XS2A), and enhanced consumer protection. PSD2 has fundamentally reshaped the European payments landscape by requiring banks to provide licensed third parties with access to customer account data and payment initiation capabilities.
A tradable certificate representing the right to emit one tonne of carbon dioxide equivalent, or a verified reduction or removal of one tonne of CO2 equivalent from the atmosphere. Carbon credits are traded on compliance markets (such as the EU Emissions Trading System) and voluntary markets, and represent an emerging class of intangible asset with growing valuation complexity as climate regulation intensifies.
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