Scheme fee management: how acquirers can optimise their margin

Dinesh Badal, Connective Payments 
September 2021

This is a summary of a more extensive article by Dinesh Badal on managing scheme fee related costs by card acquirers.
Download the full version of the article here:


The card payments industry show high growth rates as the consumer preference to non-cash transactions is driven by the growth in online and mobile commerce. Furthermore there is an  increasing usage of cards for low-value transactions. This trend has even been accelerated by the impact of Covid19 on the shopping behaviour of consumers.

The rapid changes in the card payments industry have an immense impact on the merchant acquiring industry and how acquirers cope with these market forces to achieve their growth strategies. There are several factors driving these changes: 

  • Changing payment needs of consumers towards more online and mobile
  • Regulatory compliance matters
  • Fraud and Security concerns
  • Emergence of non-banking players

The payment networks, like MasterCard and Visa, are constantly revising their network standards and pricing and fee structure to the rapid changes in the card payment industry. Merchant Acquirers who act as link between merchants, issuers, and payment networks in the whole process of card payment transaction processing need to cope with these changes. This will make the difference to which extent acquirers are able to be and remain successful as these pricing and fee structure changes have an immense impact on margin, compliance and (payment) processes. Besides merchant acquirers also merchants, issuing banks and other stakeholders like investors are impacted.

In this paper we will discuss the key drivers of recent pricing and fee structure changes and successful methods for stakeholders to maintain or increase their margin.

Basics of scheme fees

The Interchange (1) Fee Regulation (IFR) which was accepted by the European Parliament and took effect on June 8, 2015 ensured that card schemes must manage their processing activities from the rest of their operations independently. The reason for this ruling is to prevent card schemes from favoring their own processing entities over processing entities of competitors. Furthermore this also prevents card schemes to hook customers with bundling processing services with other services. As a result the card schemes split their services in broadly 3 ways: Scheme, Switching and Services.

Recent high impact pricing and fee structure changes

See overview below of EEA changes in card scheme fees of MasterCard and Visa in the period 2017-2020 which are currently known (July 2021).

Successful methods for stakeholders to maintain or increase margin

As card scheme fees are the second biggest acquiring cost (after interchange) any change of the card schemes in pricing and fee structure impacts margin. Furthermore the focus of card schemes in generating revenue is more and more through fines and non compliance fees, for example like the introduction of the MasterCard Single Tap and Visa System Integrity fees.

This emphasises the importance for acquirers and merchants to know and manage the changes in fees and fee structure as well as insight in their card scheme cost and future card scheme cost exposure. Basically, there are two ways of margin management on the scheme cost side: one is to charge scheme fee changes one on one to customers, the second is scheme fee optimisation.

Dive deeper

If you are interested to gain more insight on the scheme fee changes 2021 and 2022 or if you want to learn more about innovative ways of margin management on the scheme cost side, please click the button on top of this article for the full monty.

Besides card scheme fee management the other major cost components for acquirers, namely Interchange fees and Processing/Switching fees, also have diverse possibilities for optimising and streamlining.
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Dinesh Badal cooperates with Connective Payments since 2017. Having worked for multiple acquirers, processors and major banks across Europe, Dinesh is specialised in optimising Card Scheme Fees management and margin management processes. He focuses on margin improvement and (financial) control in payments.


(1) Interchange fee is the term used for fees between banks for the acceptance of card-based transactions. Usually it is a fee for facilitating transactions that a merchant’s bank (the “acquiring bank”) pays to the customer’s bank (the “issuing bank”).

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