1.5 Scheme Charges and Fees

Topics covered: What type of fees are charged for operating the card scheme network and processing transactions on the network?

1.5.1 Scheme Fees

Card scheme fees include a combination of fixed fees and variable fees. Fixed fees are based on which card scheme services are used and the volume of transactions processed. Variable fees are typically at a transaction level, based on the card type, payment method and country.

Some issuer fees are based on the quarterly QMR/QOC reports submitted by the issuer for the previous quarter. The scheme reviews the reports and bills the issuer. If there are any discrepancies, the scheme will bill based on details on record and query the discrepancy1.

Thredd produces most of the data required for the quarterly report. Additional information required typically relates to fraud, chargebacks and losses. (The scheme provides an FX rate to use, which depends on the base currency of the issuer’s products with the scheme; the issuer must align all supported billing currencies to provide the details in the equivalent base currency.)

For any queries relating to scheme fees, please check with your issuer. Thredd does not have information about why specific card scheme fees may have been applied to your programme.

1.5.2 Interchange and Processing Fees

An interchange or processing fee is a transaction fee passed between the acquirer (from the merchant’s account) and the issuer whenever a customer uses a card to pay for a transaction. The fee includes a handling fee and other charges. Below are examples of interchange and processing fees:

  • POS transactions – positive interchange fee is paid to the issuer (the merchant pays)

  • ATM transactions – negative interchange fee is paid to the operator of the ATM

  • ATM card capture – fee is paid to the operator of the ATM

  • Stolen card fee – processing fee paid by the issuer to the acquirer of the merchant that held back the stolen card.

Other types of fees include:

  • Foreign Exchange fees – where the card scheme provides the exchange rate for currency conversion, they will charge a fee for this service

  • Settlement fees – for clearing and settlement (where money is exchanged between network participants)

Corporate programmes provide a higher level of interchange revenue for the issuer.

1.5.3 Chargeback and Arbitration Fees

Disputed transactions in which a Chargeback is raised may incur additional Chargeback fees, payable to the Card Scheme (Visa/Mastercard) and to the acquirer or issuer.

1.5.4 Penalties

Penalties may be charged for breaches of the scheme’s rules, for example, where an issuer fails to authorise a transaction in a timely manner, not processing payments according to the scheme’s rules and allowing fraudulent usage of the network.

Issuers and acquirers can pass on some of these costs to their customers (program managers and merchants).