Payment Processors, Fees and How They Are Shared

A payment processor is a company that runs the technology that moves card transactions between the parties, and most banks use a processor rather than building the whole system themselves. An issuer processor runs the card management system, the authorisation engine and the statement production for the issuing bank, so it decides in milliseconds whether a transaction is approved. An acquirer processor runs the merchant onboarding, the terminal and gateway connections and the clearing file production for the acquiring bank. A payment gateway is the online front door that collects card details from a checkout page, encrypts them and passes them to the acquirer processor, so the merchant never touches the raw card number. Card fees are built from three parts, and each part goes to a different party. Interchange is the fee the acquirer pays to the issuer for each transaction, and it is the largest part, because it compensates the issuer for the credit risk, the fraud risk and the cost of running the card account. The scheme fee goes to the card scheme for running the network, setting the rules and providing the clearing service, and it is usually a small fixed amount plus a tiny percentage. The acquirer markup is the margin the acquirer keeps for serving the merchant, providing the terminal or gateway, and taking the merchant risk. Together, the three parts make up the merchant service charge that the merchant pays on every card sale. The EUR 120 online purchase shows how the fees split in practice. Suppose the interchange rate is 0.30 percent, which is EUR 0.36, the scheme fee is EUR 0.05 plus 0.02 percent, which is about EUR 0.07, and the acquirer markup is 0.40 percent, which is EUR 0.48. The total merchant service charge is EUR 0.91, so the merchant receives EUR 119.09 from a EUR 120 sale. The issuer keeps EUR 0.36, the scheme keeps EUR 0.07, and the acquirer keeps EUR 0.48. These rates are illustrative, because real rates depend on the card type, the channel and the country, and regulated consumer debit interchange in Europe is capped, which is why a debit purchase costs the merchant less than a credit purchase of the same amount. Fees create risks and design questions that a business analyst and a product owner must handle explicitly. A merchant who does not understand the fee split may dispute a settlement that is EUR 0.91 short, so the settlement report must show the gross amount, each fee and the net amount. A product owner should consider whether the merchant is charged a blended rate, which is one simple rate for all cards, or an interchange plus rate, which passes through the real cost of each card type, because the choice changes the merchant bill and the sales conversation. Testing must reconcile a full day of transactions to the cent, because a rounding error of one cent on a EUR 120 sale becomes a large difference across ten thousand sales, and finance teams will not accept a settlement file that does not balance. Worked example with numbers: the EUR 120 online purchase splits into three fees. The interchange rate is 0.30 percent, which is EUR 0.36, and it goes to the issuer, Meridian Bank, because the issuer carries the credit risk and the fraud risk. The scheme fee is EUR 0.05 plus 0.02 percent, which is about EUR 0.07, and it goes to the scheme for running the network. The acquirer markup is 0.40 percent, which is EUR 0.48, and it goes to Harbour Bank for running the merchant service. The merchant receives EUR 120 less EUR 0.91, which is EUR 119.09, and the settlement report must show the gross amount, each fee and the net amount, so that the merchant can reconcile. Failure and recovery: fees fail when the merchant does not understand the split, and the failure shows up as a disputed settlement. A merchant who expects EUR 120 and receives EUR 119.09 may raise a dispute, and the acquirer must show the settlement report with the interchange, the scheme fee and the markup, so that the merchant can see where the EUR 0.91 went. If the interchange rate changes, because the card is a commercial card instead of a consumer card, the fee can rise sharply, and the merchant must be told before the change takes effect, not after. The recovery for a fee dispute is a clear settlement report and a rate card that the merchant can check, because a fee that cannot be explained cannot be defended. For a business analyst, product owner or subject matter expert, the fee requirement must state the three parts, interchange, scheme fee and acquirer markup, and must state who receives each one and why. The requirement must also state the EU and UK caps, 0.2 percent for debit and 0.3 percent for credit under Regulation (EU) 2015/751, because those caps decide the maximum interchange a merchant can be charged. The test pack must include a consumer card, a commercial card, and a card from outside the EU, because each one carries a different interchange rate, and a test that only covers a consumer card will miss the fee that surprises the merchant. Source: Regulation (EU) 2015/751; Visa and Mastercard interchange guides; last reviewed 7 November 2026.