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.
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 maximum 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.