Understanding Interchange

Find out what interchange is and the value it delivers

What is interchange?

Interchange is a small fee paid by a merchant's bank (acquirer) to a cardholder's bank (issuer) to compensate the issuer for the value and benefits that merchants receive when they accept electronic payments. It enables banks that issue electronic payments to deliver tremendous value to merchants, governments and consumers.

Interchange helps maximize the value delivered to all stakeholders

Merchants

Merchants benefit from guaranteed payment, increased sales and lower processing costs than those associated with paper payments such as cash and checks. Electronic payments also provide them with the ability to attract and retain customers with a fast and efficient buying experience.

  • For the past 10 years, on average for every $1.00 of interchange paid, U.S. merchants benefit from $1.60 in increased sales paid for by the issuer as a result of guaranteed payment
  • In the U.S., on average, the value derived from accepting credit cards is more than five times the amount paid in interchange
  • The value provided to merchants from electronic transactions is about 1.5 to 2.5 times the total cost of acceptance for debit and about 2.5 to 3 times the total cost of acceptance for credit
  • Average debit and credit transactions range from two to four times the size of a cash transaction in developed markets to over 20 to 30 times respectively in others

Governments

Governments experience significant efficiencies while promoting financial inclusion when they distribute social benefits, collect receivables and enable services via electronic payments.

  • Electronic payments help safeguard against waste, fraud and abuse
  • Using electronic payments to deliver social benefits is more efficient and secure
  • Black and grey economies fueled by untraceable and untaxable cash payments flourish where electronic payments use is low

 

Consumers

Convenience and safety, increased opportunity for financial inclusion, access to rewards and incentives and the choice of thousands of innovative credit, debit and prepaid payment products are among the many benefits consumers derive from electronic payments.

  • Payments allow consumers to access money whenever and wherever they want
  • Interchange makes it possible for issuers to provide consumers with interest-free periods on credit cards
  • Electronic payments provide consumers with a more secure and efficient way to pay - whether in-person, online or in-app

Our role 

Mastercard does not earn revenue from interchange.

Where not fully regulated by the government, Mastercard sets interchange rates based on the value delivered by the issuing bank and the benefits of accepting electronic payments. Setting interchange at the right level is important because if interchange rates are set too high, merchants may choose not to accept cards; and, if interchange is set too low, issuing banks have no incentive to cover the risks of issuing payment cards.

Setting interchange rates at the appropriate level also helps ensure that both issuers and acquirers deliver services that optimize the effectiveness of the payments system and spur development of innovative payment solutions. 

Flexible interchange rates make it possible for electronic payments to deliver maximium value at the lowest cost for both merchants and consumers. Interchange also promotes credit availability for small businesses and is a key driver for financial inclusion when set at the optimal level.

 

U.S. interchange programs and rates

What you need to know

Learn more about interchange and the benefits of the system it helps support through the following resources:

Interchange Facts and Myths

Consequences of the Mandated Decrease of Interchange Fees in the United States

Impact of Regulation in Australia

Global wholesale travel transaction program interchange rates

Europe interchange rates