INTERCHANGE MANAGEMENT

Interchange fee is a term used in the payment card industry to describe a fee that a merchant's bank (the acquiring bank) pays a customer's bank (the issuing bank) when merchants accept cards using card networks such as Visa and MasterCard for purchases.

The interchange fee is a percentage of the transaction amount and a unit fee, and it is derived from an accounting formula as per the network
standards.

In ATM and debit card systems, interchange flows in the opposite direction - when a consumer gets cash, the bank that owns the ATM collects the fee.

The specific Interchange fee applied to a transaction depends on numerous variables; including,

The merchant's industry type (MCC – Merchant Category Code)
The type of card (Rewards, Signature, Corporate, Debit, etc.)
The method of entry (swiped Vs keyed)
The adherence to compliance standards
     Authorization Vs Settlement timing
     Agreement between banks with network

Acquirer and Issuer, Country and region
Type of Transaction i.e. Purchase, ATM, Manual Cash