Interchange fees

Interchange fees are fees paid by a merchant's acquiring bank to a card-issuing bank for processing a payment transaction. These fees are typically a percentage of the transaction value and are set by the card networks (e.g., Visa, Mastercard, etc.). The fees are intended to compensate the card-issuing bank for the risk and cost of processing the transaction and maintaining the payment network infrastructure.

Several factors impact interchange costs, including:

1. Transaction type: Different types of transactions, such as online transactions or contactless payments, may incur different interchange fees.
2. Card type: The type of card used for the transaction (e.g., debit or credit) can also impact the interchange fee.
3. Merchant category: Merchants are typically categorized based on the type of goods or services they offer. Different categories may have different interchange fees.
4. Transaction value: Interchange fees are typically a percentage of the transaction value, so the higher the transaction value, the higher the interchange fee.
5. Risk: The level of risk associated with the transaction can also impact the interchange fee. For example, a transaction with a high risk of fraud or chargeback may incur a higher interchange fee.

Quick Tips for Decreasing Interchange Costs

• Prompt capture: Capture authorized transactions promptly to avoid higher interchange rates. Transactions that are authorized but not captured promptly (within 24 hours) can sometimes be downgraded to a higher interchange rate category, increasing costs.
• Utilize Address Verification Service (AVS): Ensure AVS is enabled for online transactions to reduce the risk of fraud and qualify for lower interchange rates.
• Supply Level 2/3 data: For B2B and B2G transactions, provide comprehensive Level 2 and Level 3 data to qualify for lower interchange rates.

For detailed information about our in-app Interchange Report, check out our Interchange Report support article.