2 PAYMENT METHOD PROFILES: CARD
Merchant Cost Considerations Card products can be among the most expensive payment methods around the globe. While some markets have stymied the growth of card fees by capping interchange or implementing routing mandates, these interventions are often limited to certain card or transaction types, typically leading to growth in unregulated card fees, such as cross-border interchange fees or scheme/network fees. Card Fees On each transaction, there are three fees that merchants typically pay: processing fees, network fees, and interchange fees. These fees are collectively known as the merchant service charge (MSC). (See Table 1 in the Appendix for a breakdown of card fees.) The size of interchange fees can vary significantly by market. For example, there are large regional variances in interchange fees as the result of various regulatory interventions, with the U.S. paying on average an estimated nearly ten times the credit card interchange cap in Europe. Conversely, there are observed similarities in how processing fees and network fees are incurred by merchants around the world. For example, network fees have risen in markets such as the United States, European Union, and Australia, albeit the increases have not always occurred on similar transaction types. Processing fees, moreover, are typically bilaterally negotiated and merchants may elect to utilize add-on services for additional costs. Charging Structure Before diving into the complexities of each card type, it’s worth noting that merchants may experience card fees differently based on the charging structure in which the fees are passed on. Merchants are typically charged in one of three ways: blended rates, interchange plus, or interchange plus plus. (See Table 2 in the Appendix for a breakdown of charging structures.)
71
Powered by FlippingBook