Card Fee Structure


#1

Hi there,

I was recently trying to find current data on how expensive it is - and why - for merchants to accept cards, but it’s hard to get accurate data on that. As far as I understand, the following parties want to earn money:

  • The bank of the consumer (e.g. Revolut)
  • The credit card company (e.g. Visa)
  • The bank of the merchant

Now from what I understand, the share of the consumer’s bank is called interchange and is now quite low (0.2 to 0.3%). Is that correct?

The question I couldn’t get an answer for is how much the credit card company gets. Does anyone have data on that? Because then I’ve tried to find some offers for merchants, and it seems like they still have to pay around 3% for card payments (see, e.g., here). So now here is my main question: There is 10x gap between the interchange and the merchant fee, where does that come from? Does Visa / Mastercard charge so much?

Thanks for clarifications!


#2

It’s complicated.

You’ve got the payment network providers (Visa, Mastercard), the issuers (banks, Revolut) and then you’ve got the payment aquirers for merchants. The interchange fee is a fee the aquirer pays the issuer.

The fees can vary depending on what kind of payments a merchant wants to accept. Higher risk payments (swipe and signature) might have different fees than more secure chip + PIN. Some aquirers also sell payment guarantees, they basically guarantee the payment for less secure non-online authorizations and ask for an extra mark up here. Online card not present transactions have different prices. And large companies like H&M, Aldi, they might negotiate their fees directly. Small business can choose if they want payments debited daily (more expensive) or in batches weekly or at the end of the month (cheaper). And part of the interchange fee reduction was eaten up by higher card scheme fees.

Also, business cards and 3 party model cards (like Amex which are issued directly without a partner bank) still have higher than 0.2/0.3 interchange fees. They are exempt by now from the regulation.

IZettle is not a good example for average merchant fees here. It’s meant for low volume occasional card payments. No fixed monthly costs but relatively high per transaction fees. It’s certainly true that card acceptance is more expensive for small businesses than it is for the big.

You might find this interesting:


#3

Thank you for the link and the infos :slight_smile:


#4

and then you have curve that gets in front of the real card, allegedly make profit and can even give you cashback! what?!


#5

There are AMEX cards issued by partner banks…


#6

I know. But that wasn’t the point. I was generally referring to cards that are exempt from the EU regulation, and 3 party direct issued Amex cards are an example. It’s sometimes okay to keep it simple, I thought.


#7

I was pointing it out because I honestly don’t know if bank issued AMEX cards follow the regulations or are also exempt. In Portugal all AMEX cards are bank issued


#8

Well, there is

  • money flowing to the credit card company and
  • money flowing to the bank of the customer.

The latter is regulated, the former isn’t. So as soon as there is a customer bank involved, it should be a regulated amount, right?

And I still don’t understand the rationale behind regulating the one thing and leaving the other open…