Merchant Services

Interchange++ Fee Guide for High-Turnover UK Businesses

Interchange++ fees can have a significant impact on the financial health of high-turnover businesses in the UK. Understanding the intricacies of this pricing model and its components is crucial for effectively managing transaction costs. By negotiating lower mark-up fees, leveraging the regulatory landscape, and utilising technology for analysis, businesses can unlock substantial savings.


A Brief Explanation of Interchange++ Fees

In the fast-paced world of business transactions, understanding the specifics of payment processing fees is crucial, especially for high-turnover businesses. A key aspect of this landscape is the Interchange++ fee structure – a pricing model that offers a detailed breakdown of transaction costs. Despite its relevance, Interchange++ fees often remain a complex topic for many businesses.

Interchange++ (also known as interchange plus plus or IC++) is a transparent pricing model used by credit card processors to charge merchants for each card transaction type. Unlike blended pricing or flat rate pricing, Interchange++ separates the transaction costs into three distinct parts: the interchange fee set by the card networks, the card scheme fee, and the mark-up fee charged by the merchant’s payment processor.

This should not be confused with interchange plus pricing (also known as cost plus pricing) which does not have explicit inclusion of the card scheme fee in the IC++ model.

Importance of understanding Interchange++ fees for high-turnover businesses

For high-turnover businesses, these fees can quickly add up, significantly affecting the bottom line. Consequently, understanding these fees, how they are applied, and strategies to manage them effectively becomes paramount.

In this blog, we will delve into the intricacies of IC++ fees, explore the impacts on high-turnover businesses, examine the UK’s specific regulatory context, and outline strategies for managing these costs. Our objective is to provide you with the knowledge to navigate the IC++ landscape confidently, enabling your business to thrive despite the complexities of transaction fees.

Understanding Interchange++ Pricing

Interchange++ pricing, though intricate, brings a level of transparency that can empower businesses when understood fully. So, let’s dissect this pricing model to see what it entails.

What is Interchange++ pricing?

Interchange++ is a pricing model that is designed to break down the costs associated with each card transaction into three distinct parts:

·      Interchange Fee: This is a fee charged by the cardholder’s bank to cover the handling costs and credit risk. It forms the majority of the transaction cost and varies depending on the type of card, payment method, and geographical location. This is generally composed of a % element plus a pence element – e.g., 0.20%+2p.

·      Card Scheme Fee: This fee is charged by the card networks (like Visa, Mastercard, etc.) for each transaction. It’s generally a smaller fixed amount, but it may vary based on the type of transaction and the specific card network.

·      Mark-up: This is the fee charged by the payment processor or merchant service provider. It is their profit for providing processing services.

Unlike flat or blended rate structures that bundle these costs into one fee, Interchange++ separates each, offering businesses a clear picture of where their money is going.

How are Interchange ++ Fees Determined?

The total Interchange++ fee depends on several factors. Firstly, the IC fee is determined by the card networks and can depend on the type of card used (debit, credit, corporate, etc.) the transaction method (online, in-person, etc.) and the country of transaction.

Secondly, the card scheme fee is set by the card networks. It’s typically a smaller fixed amount, although it can vary depending on the card network and type of transaction.

Lastly, the mark-up is decided by your merchant service provider. This part can be negotiated based on your business’s transaction volume and your relationship with the provider.

Who Benefits from Interchange++ Fees?

Each component of the Interchange++ fee goes to a different part of the transaction chain. The interchange fee goes to the cardholder’s bank, the card scheme fee goes to the card network, and the markup goes to the payment processor or merchant service provider. By understanding this, businesses can better understand where their transaction costs are going and potentially negotiate better terms with their merchant service provider.

In the next section, we’ll take a closer look at the impact of IC++ fees on businesses with high transaction volumes and explore some strategies for managing these costs effectively.

The Impact of Interchange++ Fees on High-Turnover Businesses

Interchange++ fees have a substantial influence on a business’s financial health, and this impact is particularly significant for high-turnover businesses. Let’s delve into the dynamics at play.

How High-Turnover Transactions Affect Interchange++ Fees

High-turnover businesses, by their very nature, conduct many transactions. Each transaction comes with its associated IC++ fees, and as such, these fees can add up quickly, forming a considerable portion of the operating expenses. While the interchange fee and card scheme fee are largely out of a business’s control as they are set by external entities, the mark-up fee charged by the merchant service provider can often be negotiated. With a higher volume of transactions, businesses may have more leverage to negotiate a lower mark-up fee.

The Bottom-Line Impact of Interchange++ Fees

Interchange++ fees directly impact a company’s profitability. With each transaction, a business incurs these costs, which reduces the net profit from sales. For high-turnover businesses, this can amount to a significant sum.

To illustrate, consider a business with a transaction volume of £1 million. If the average total Interchange++ fee is 2%, that’s £20,000 in fees – a substantial amount that could be used elsewhere in the business.

Real-World Impact: Case Study

Consider a large UK-based online retailer that processes an average of £5 million in credit card transactions monthly. If they manage to negotiate a reduction of 0.1% in their mark-up with their merchant service provider, that could lead to an annual saving of £60,000. This is a clear demonstration of the potential savings high-turnover businesses can achieve with a keen understanding and effective negotiation of IC++ fees.

In the following sections, we will look at the regulatory landscape in the UK concerning Interchange++ fees and provide strategies that your business can use to manage these fees more effectively. By becoming proficient in this aspect, your business can greatly enhance its profitability.

UK Regulations Pertaining to Interchange++ Fees

Understanding the regulatory landscape of Interchange++ fees in the UK is pivotal for businesses operating in the country. Let’s navigate the specifics.

UK’s Regulations on Interchange++ Fees

The UK, as part of the European Economic Area, initially adopted the Interchange Fee Regulation (IFR) introduced by the European Union in 2015. The IFR caps the interchange fees that banks can charge for debit card transactions and credit card transactions. For debit cards, the fee is capped at 0.2% of the transaction value, and for credit cards, it’s capped at 0.3%.

The aim of this regulation was to standardise costs, increase transparency, and encourage competition within the payment processing industry. For businesses, this regulation has been beneficial as it prevents interchange rates from escalating uncontrollably.

Post-Brexit Impact on Interchange++ Fees

With Brexit, there were initial concerns that the UK would abandon the IFR, leading to increased IC fees. However, the UK government announced in 2020 that it would maintain the existing interchange fee caps. Therefore, for the foreseeable future, high-turnover businesses in the UK can continue to benefit from these regulated rates.

Card Scheme Fees and Mark-up Regulation

While interchange fees are regulated, card scheme fees and the mark-up charged by payment processors are not capped or regulated. Therefore, these components of the Interchange++ model can vary significantly between different providers. This further underlines the importance of understanding these fees and negotiating effectively with your merchant service provider.

In the next section, we will explore strategies to manage Interchange++ fees effectively for high-turnover businesses operating in the UK. By integrating these strategies into your operations, your business can potentially save a significant amount in transaction costs.

Strategies to Manage Interchange++ Fees for High-Turnover Businesses

While the IC++ fee structure might seem complicated, with the right strategies in place, high-turnover businesses can effectively manage these costs.

Negotiating Lower Interchange++ Fees with Payment Processors

The mark-up fee in the IC++ pricing model is the most flexible component and the one that businesses can negotiate with their payment processors. High-turnover businesses, due to the sheer number of transactions, hold a stronger bargaining position and may secure lower markups. However, successful negotiation depends on understanding your transaction patterns, the current market rates, and the value you bring to your merchant service provider.

Role of Payment Gateways and Merchant Accounts in Managing Interchange++ Fees

Choosing the right payment gateway and merchant account can help manage Interchange++ fees.

Some providers specialise in high-turnover transactions and can offer competitive rates. Furthermore, different providers may classify transactions differently. For instance, some may classify certain types of transactions as ‘lower risk’, which could result in lower interchange fees. Understanding these nuances can enable businesses to make informed decisions.

Leveraging Technology to Track and Manage Interchange++ Fees

Sophisticated financial software and tools can provide insightful analytics to understand your transaction costs better. These tools can help identify patterns, trends, and potential areas of savings. For example, they can highlight the types of transactions that incur higher fees, enabling businesses to adjust their practices accordingly.

Examples of this can be seen in past years in the pricing strategies that were adopted by popular supermarkets Aldi and Lidl in the UK. Both retailers had a long-standing policy of only accepting debit cards for in-store purchases. The rationale behind this decision was largely related to the cost of accepting credit card payments.

Each time a customer uses a credit card to pay for a transaction, the retailer must pay fees to the card issuer. These fees typically include the IC fee, the card scheme fee and the mark-up fee that we discussed earlier. The costs can vary depending on the type of card and the specifics of the transaction, but they’re often higher for credit cards compared to debit cards.

Under the IC++ model, these costs can be broken down as follows:

  1. IC fee: For a credit card, this might be 0.80% of the transaction value plus 10 pence per transaction. For a debit card it could be 0.20% plus 1 pence per transaction.
  2. Card scheme fee: This might be an additional 0.20% of the transaction value, regardless of card type.
  3. Mark-up fee: This is the payment processor’s margin. For the sake of this example, let’s say it’s 0.1% of the transaction value.

So, for a £100 transaction, a retailer would pay £1.10 in fees for a credit card payment, but only 50 pence for a debit card payment. As you can see, by only accepting debit cards, Aldi and Lidl were able to significantly reduce the costs associated with card payments, which aligns with their focus on cost efficiency and value for money.

In a business world that is becoming more complex and competitive, managing your Interchange++ fees effectively can lead to significant cost savings and improved profitability. In the next section, we will look at current trends and future predictions concerning Interchange++ fees and their potential impact on high-turnover businesses.

Future Trends and Predictions

Analysis of current trends in Interchange++ fees in the UK 

As the business landscape evolves, so too does the domain of transaction fees. Currently, some of the prominent trends in the UK is the growing adoption of IC++ pricing, with more payment processors and businesses opting for this transparent and detailed fee structure.

Another notable trend is the rise of digital payments, further driven by the COVID-19 pandemic as more transactions move online, businesses must understand the specific interchange fees associated with these types of transactions, which are typically high than in-person transactions.

Furthermore, despite Brexit, the UK has chosen to continue with the interchange fee caps set by the European Union’s Interchange Fee Regulation (IFR). This decision has given high-turnover businesses some predictability concerning interchange fees.

Predictions on future changes and their potential impact on high-turnover businesses

Looking to the future, it’s likely that digital transactions will continue to increase, bringing along with them the potential for higher average interchange fees for businesses. The rise of new payment technologies, like digital wallets and contactless payments, could also potentially impact interchange fees as card networks may revise their fee structures to adapt to these changes.

The UK’s regulatory landscape could also change in the future, especially as the country sets its course post-Brexit. While the current interchange fee caps are set to continue, future revisions cannot be ruled out. Any changes to these regulations could directly impact high-turnover businesses.

With these potential future changes, high-turnover businesses must stay updated with the latest trends and developments in the realm of transaction fees. Staying ahead of these changes can enable businesses to anticipate shifts, adjust strategies, and minimise the potential impact on their profitability.


Given the significant impact of IC++ fees on profitability, it’s vital for high-turnover businesses to proactively manage these fees. While they may daunting at first, with a clear understanding and strategic approach, businesses can effectively navigate this landscape.

Remember the key lies not in eliminating these fees – as they are an inevitable part of card transactions – but in understanding, managing, and where possible, negotiating them. By doing so, businesses can potentially save substantial costs, enhance their profitability, and stay competitive in the dynamic business landscape.

If you’re seeking to better manage your Interchange++ fees, Unyfi are here to help. Our team of experts is ready to provide a tailored consultation, whether you need help understanding your current fee structure, negotiating with your payment processor, or implementing strategies for managing these fees effectively.

Remember, managing your transaction fees effectively is an essential part of business success. Don’t let the complexity of Interchange++ fees deter you from taking control of your costs. Reach out to us today and let us help you on your journey to enhanced profitability. 

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