Regulatory
Interchange Regulation
Definition
Interchange Regulation government-mandated caps on interchange fees. The EU caps consumer card interchange at 0.2% for debit and 0.3% for credit. UK retained similar caps post-Brexit. US Durbin Amendment caps regulated debit interchange. Commercial and cross-border transactions often exempt from caps. Regulation reduced merchant costs but affected card rewards programs.
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.
PSD2 (Payment Services Directive 2)
European regulation governing payment services, effective since 2019. Key provisions include Strong Customer Authentication (SCA) requirements, open banking mandates, and enhanced consumer protections. Applies to EEA countries and influenced UK regulations. PSD2 changed the payment landscape by requiring 3DS for most online transactions and enabling third-party access to bank accounts.
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