Interchange

Interchange is vital to the effective running of the payments system. Watch this video to understand how the transactions you make are facilitated and who’s involved.

Interchange

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What is interchange and why is it necessary?

Whenever you buy something with your Visa card, four parties are involved: You, your bank, the retailer you buy from, and the retailer’s bank.

Both banks perform a series of steps to ensure your payment is processed and transferred securely, and it reaches the retailer promptly.

When your bank sends your payment to the retailer’s bank (known as the acquiring bank), a small fee is retained. This is called the interchange fee. Visa doesn’t receive any of this fee.

If interchange didn’t exist, your bank would find it difficult to cover the costs it incurs in operating your card services, such as fraud prevention, systems maintenance and customer call centres. If this were the case, your bank may stop investing in innovation, stop issuing cards altogether or increase the fees that you pay for its card services.

Similarly, when the retailer’s bank sends the payment to the retailer, it deducts a small fee – this is called the Merchant Service Charge and incorporates a number of component fees such as the interchange fee, costs to cover services provided by their bank, such as guaranteed payment, and the technology to accept card payments such as a terminal or contactless reader. This rate is negotiated directly between the retailer and its bank. Visa doesn't participate in this process.

What does it cost and how is this decided?

The level of interchange, in most cases, is a small ad valorem percentage of the total transaction amount.

This fee is set by Visa and has traditionally varied by the type of transaction, the product involved and from country to country. From 9 December 2015, European regulation on interchange fees (Regulation (EU) 2015/751 of the European Parliament and of the European Council of 29 April 2015 on interchange fees for card-based transactions, “the IFR”) imposes interchange fee caps on most product types within the European Economic Area (EEA).

Details of the different fees are available on the Interchange Fees page.

What is interchange used for?

Interchange is used to help the payment system function quickly and securely:

  • It helps cover the costs of operating card services that banks might otherwise pass onto consumers
  • It contributes to investment in creating the ease and security of electronic payments that consumers have come to rely on and expect; for example, Chip and PIN and Verified by Visa help reduce fraud and increase transparency
  • It helps investment in the future development and maintenance of the system which in turn allows companies like Visa Europe to make payments faster, more secure and more convenient, such as Contactless. Any system that is used by millions of consumers and businesses each day benefits from continual investment