April 2023 Summaries

Interchange fees are charges merchants incur when accepting card payments, combining amounts paid to the card issuer, card network, and acquiring bank or payment facilitator, usually as a percentage of the transaction plus a fixed fee. During a card transaction, the acquirer routes payment information through the card network to the issuer for approval, after which the merchant pays interchange and processor markup, with much of the fee compensating issuers for credit and fraud risk. Rates commonly range from about 1.3% to 3.5% plus a small fixed charge and vary by factors including whether a card is present, card type, network, merchant category, country of issuance, security practices, commercial versus consumer use, and regional regulation. The text notes that interchange caps differ internationally, including limits in the EEA and Australia, while U.S. credit-card interchange is generally uncapped and certain debit fees are regulated. Payment processors may use interchange-plus, tiered, flat-rate, or subscription pricing models, each affecting transparency and predictability of costs. These fees can influence merchant profitability, pricing, cash flow, payment options, and processor selection, while possible reduction strategies include comparing processors, improving transaction security and data practices, encouraging lower-cost payment methods, and considering credit-card surcharges; it also highlights Airwallex payment products as one option for international collection and pricing.