Regulatory
Cross-Border Fees
Definition
Cross-Border Fees additional fees applied when the card-issuing country differs from the merchant's country. Includes both interchange surcharges and scheme fees. Cross-border transactions typically cost 0.5-2% more than domestic. Can be mitigated through local acquiring in key markets. Significant cost factor for international merchants.
Related Terms
Interchange Fee
The fee paid by the acquiring bank to the issuing bank each time a card transaction is processed. Set by card networks (Visa, Mastercard), interchange varies based on card type (debit vs credit, rewards vs standard), merchant category code, transaction type (card-present vs card-not-present), and geography. Interchange typically represents the largest component of payment processing costs, ranging from 0.2% for regulated debit to 2%+ for premium rewards cards.
Scheme Fees
Fees charged by card networks (Visa, Mastercard) for various services beyond the basic assessment. Includes authorization fees, clearing fees, cross-border fees, data usage fees, and program fees. Scheme fees have grown significantly in recent years and can add 0.1-0.3% to transaction costs depending on geography and transaction characteristics. Often bundled or passed through as part of IC++ pricing.
Local Acquiring
Processing transactions through an acquirer in the same country as the cardholder. Reduces cross-border fees and often improves approval rates due to issuer preferences for domestic transactions. Requires merchant account in each country or a PSP with local acquiring capabilities. Cost-effective for merchants with significant volume in specific markets.
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