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Interchange Plus (IC+) is a pricing model typically only offered to merchants with a high annual card turnover. Approximately 35% of UK merchants with an annual card turnover above £10 million will have IC+ or IC++ pricing (source).
98% of UK SMEs with an annual card turnover of less than £10 million are on a standard blended pricing structure.
In this guide, we’ll look at what interchange plus pricing is and how it differs from interchange plus plus (IC++) and blended pricing.
Before we unpack IC+ pricing in detail, it’s worth recapping the four main fee models available to merchants:
These pricing models differ in how they calculate and merchant service charge (MSC) and how transparent they are how it is made up. Just to recap, the MSC is made up of:
The 3 main components of the MSC fees are retained by the acquiring bank, the card scheme and the card issuer as follows:
All 3 elements are charged for every card payment.
So why offer different pricing models if the fees are paid on every transaction? It mostly comes down to larger merchants having the buying power to get more transparency on how the MSC is charged.
Interchange plus pricing (IC+) is one of the more transparent pricing models, breaking the total MSC down into two components in the statement:
Interchange fees are put in place by the card network (Mastercard, Visa, American Express, etc) and are, for the most part, advertised online for businesses to compare.
Legislation came into play in 2015 to cap interchange fees at 0.20% on consumer debit cards and 0.30% on consumer credit cards.
This means that when a card transaction is made the acquirer should pay the card issuer no more than 0.3% of the value of any credit card transaction and 0.2% of the value of any UK debit card transaction.
These caps do not apply to commercial cards which have higher fees.
You may also be interested in this comprehensive list of all card processing fees you may be liable to pay when processing card in the UK.
As a result of Brexit, Mastercard and Visa revised the interchange fees for transactions between the UK and EEA from October 15th 2021.
Visa and Mastercard Consumer card-not-present (CNP) transactions between the UK and EEA countries will be charged in line with the interregional capped consumer rates of 1.15% for debit cards and 1.50% for credit cards (previously these were 0.20% for debit cards and 0.30% for credit cards). The consumer CNP interchange rates for EEA-issued cards at UK-merchant locations will remain unchanged.
The interchange rates for Visa Business cards will be set at 1.60% while Corporate and Purchasing cards are revised to 1.80%.
Despite this transparency, IC+ fees will vary depending on which card(s) your customers use and the markup your payment service provider (ISO or merchant acquirer) adds on. So while interchange plus pricing is more transparent versus blended/standard and fixed, it’s still not set in stone.
If IC+ pricing offers greater transparency versus blended/standard and fixed pricing models, then interchange plus plus makes the total MSC even more transparent for merchants.
IC++ pricing breaks the total fee down into:
This pricing model is even more desirable for merchants as it minimises the risk of any hidden fees. However, IC++ is a passthrough model and therefore subject to cost swings.
Standard or blended pricing combines the interchange fee, card scheme fee and acquirer markup into several headline rates that are applied to different types of purchase transactions. These rates can either be in the form of a pence per transaction fee, a percentage of the transaction amount or a combination of the two.
We cover the differences between blended and IC+ in more detail here.
Merchant Savvy can help you negotiate more favourable acquirer markup fees, whichever pricing model you are on.
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