Breaking down the merchant service charge (MSC)
The MSC (merchant service charge) is the fee the acquirer deducts from every card payment the merchant accepts. It breaks down into interchange (paid to the issuing bank), scheme fees (paid to the network: CB, Visa, Mastercard), and the acquirer markup (which pays the PSP or acquirer for its risk and processing). Each of the three components goes to a different party and is set by its own rules. Knowing the breakdown is the basis of any comparison of offers and any serious fee negotiation.
| Component | Recipient | Typical amount | Notes |
|---|---|---|---|
| Interchange | Issuing bank | 0,20 € (0,2 %) | Capped by the IFR for consumer cards |
| Scheme fees | Network (the CB consortium or Visa/Mastercard) | €0.01 to €0.10 | Highly variable: the domestic CB network costs far less than the international brands |
| Acquirer margin | Acquirer / PSP | €0.10 to €0.40 | Negotiable; depends on volume, sector, and risk |
| Total MSC | – | €0.30 to €0.70 | That is, 0.3% to 0.7% for this profile; more for commercial cards and outside the EEA |
IFR caps: 0.2% and 0.3%
Regulation (EU) 2015/751, known as the IFR (Interchange Fee Regulation), caps interchange on consumer payment cards in the EEA. The cap is 0.2% of the amount for debit cards and 0.3% for credit cards (including deferred debit). The goal was to end the upward spiral of interchange fees, which merchants ultimately bore without being able to negotiate them with issuers.
| Transaction type | Debit | Credit / deferred debit | Legal basis |
|---|---|---|---|
| Domestic and intra-EEA, consumer card | 0,2 % | 0,3 % | IFR Art. 3 and 4 |
| Commercial card (business, corporate) | Not capped | Not capped | Outside IFR scope (Art. 1) |
| Interregional (non-EEA issuer), card present | 0,2 % | 0,3 % | Visa/Mastercard 2019 commitments |
| Interregional, remote sale (CNP) | 1,15 % | 1,50 % | Visa/Mastercard 2019 commitments |
CB/Visa/Mastercard co-badging: the costly brand choice
Co-badging means two payment brands on the same card, each able to route the transaction over its own network. Almost all French payment cards are co-badged, carrying the domestic CB brand and an international brand (Visa or Mastercard). With about 78 million CB cards in circulation, every domestic payment can therefore travel over two different networks. The cost to the merchant depends on the network used, a fact that is still little known. When a customer picks “Visa” or “Mastercard” instead of “CB” on a payment page, the same transaction costs the merchant more.
The cost gap sits in the scheme-fee component of the MSC. Interchange is identical or nearly so, capped by the IFR in both cases for a consumer card, while scheme fees diverge sharply. The CB consortium (GIE CB), a shared domestic interbank structure, charges fixed fees of a few tenths of a cent to about 1 cent per transaction. Visa and Mastercard combine ad valorem and fixed components (authorization, clearing, brand fees, reporting, mandatory services) that commonly add up to 0.05% to 0.15% of the amount, sometimes more. Many acquirers pass these costs on through their own fee schedules, which widens the final gap.
| Component | CB routing | Visa/Mastercard routing | Difference |
|---|---|---|---|
| Interchange | 0,10 € (0,2 %) | 0,10 € (0,2 %) | ≈ 0 |
| Scheme fees | ≈ €0.005 to €0.01 | ≈ €0.03 to €0.08 (+ fixed fees) | ×3 to ×8 |
| Acquirer margin | same | same or higher (per-brand pricing) | 0 to + |
| Typical total extra cost | – | – | +0.05 to +0.15 points of MSC |
This choice has a regulatory origin. Article 8 of the IFR bars schemes and issuers from imposing a brand on a co-badged card. Since June 9, 2016, the cardholder chooses the brand. The merchant, for its part, can install a priority selection mechanism that sets the default brand. On a POS terminal, a co-badged card defaults to CB unless the cardholder acts. In e-commerce, the payment page must display the available brands, with a preselected choice configured by the merchant that the customer can always change in one click.
- Set CB as the default display priority with your PSP (a standard option at PSPs operating in France).
- Check how the payment page actually renders: the “CB” badge must be visible and preselected for co-badged cards.
- Track the brand mix in acquirer reports (CB vs. Visa vs. Mastercard share on domestic cards) and investigate any drift.
- Negotiate interchange++ pricing to make the scheme-fee gap visible line by line, instead of buried in a blended rate.
- Watch out for wallets: depending on the implementation, some wallets (xPay) tokenize on the international network by default. The payment then goes through the international brand rather than CB, whatever display priority is set on the payment page.
Blended vs. interchange++ pricing
Two main acquirer pricing models coexist. Blended pricing applies a single rate (for example, 1.2% + €0.10) regardless of card type. It keeps billing simple and predictable, and it lets the acquirer keep the difference when the card presented costs less than the average rate. Interchange++ (IC++) charges the merchant the actual interchange + the actual scheme fees + a fixed, contractual acquirer markup. It passes through the true cost item by item and is almost always cheaper at significant volume, at the price of sustained reconciliation work.
| Transaction | Actual cost (IC + scheme) | Blended 1.2% | IC++ (0.25% markup) |
|---|---|---|---|
| Domestic consumer debit (CB) | ≈ 0,22 € | 1,20 € | ≈ 0,47 € |
| Intra-EEA consumer credit (Visa) | ≈ 0,45 € | 1,20 € | ≈ 0,70 € |
| Non-EEA commercial card (Mastercard) | ≈ 2,20 € | €1.20 (acquirer loss or surcharges) | ≈ 2,45 € |
Who gets what: the revenue map
Beyond the MSC, each player in the four-party model has its own revenue structure. Mapping these sources explains why rising scheme fees, capped interchange, and the growth of wallets shift value from one player to another.
| Company | Role | Main revenue | Paid by |
|---|---|---|---|
| Issuer | Issues the card, carries cardholder risk | Interchange, card fees, FX markups, interest (credit) | Acquirers (via the scheme), cardholders |
| Scheme (CB, Visa, Mastercard) | Rules, brand, switching, clearing | Scheme fees (authorization, clearing, brand, services), licenses, data | Issuers AND acquirers |
| Acquirer / PSP | Merchant contract, acceptance, payment guarantee | Markup on the MSC, POS terminal rental, ancillary fees (disputes, reports), value-added services | Merchants |
| Merchant | Sells, pays the MSC | — (bears the final cost of acceptance) | – |
| Cardholder | Pays with the card | — (card fees, FX; “free” is funded by interchange) | – |
Elsewhere in the world. The same mechanism, elsewhere.
Regulatory caps on interchange and their level
Regulation II (12 CFR Part 235), adopted under the Dodd-Frank Act, caps only debit: 21 cents per transaction, plus 0.05% of the value, plus 1 cent if the issuer meets the fraud-prevention standards. Credit card interchange is not capped.
Federal Reserve Board, Regulation II, https://www.federalreserve.gov/paymentsystems/regii-about.htm
The Reserve Bank of Australia's March 2026 conclusions cut interchange on domestic debit and prepaid cards to 8 cents per transaction or 0.16% of the value, and on domestic consumer credit cards to 0.30%, replacing the weighted-average benchmark with a hard cap. The changes apply from October 1, 2026.
Reserve Bank of Australia, Review of Merchant Card Payment Costs and Surcharging – Conclusions Paper, March 2026, https://www.rba.gov.au/payments-and-infrastructure/review-of-retail-payments-regulation/2026-03/conclusions-paper/interchange-fees.html
Circular 3.887 of the Banco Central do Brasil, issued on March 26, 2018, and in force since October 1, 2018, limits interchange on debit cards in domestic payment arrangements to 0.5% on average, weighted by transaction value, and to 0.8% at most on any single transaction, monitored quarterly. The observed average rate fell from 0.79% in Q3 2018 to 0.51% in Q1 2020.
Banco Central do Brasil, Estudos Especiais nº 106, “Avaliação do resultado regulatório da introdução de limites… cartão de débito,” https://www.bcb.gov.br/conteudo/relatorioinflacao/EstudosEspeciais/EE106_Resultado_regulatorio_cap_cartao_de_debito.pdf
After Brexit, the IFR was carried over into UK law. Article 3 of the domestic version still prohibits offering or requesting interchange above 0.2% of the value for a UK debit card transaction. The Financial Services and Markets Act 2023 (Schedule 1) provides for revoking this retained regulation in favor of rules set by UK authorities, but the revocation has not yet taken effect.
legislation.gov.uk, Regulation (EU) 2015/751, Art. 3 (UK version), https://www.legislation.gov.uk/eur/2015/751/article/3
Cards and issuers outside the cap
The US cap applies only to issuers with at least $10 billion in assets; small issuers, government programs, and general-use reloadable prepaid cards are exempt. The measured gap is large: in 2024, average interchange for exempt issuers was $0.51 per transaction, or 1.21% of the value, versus $0.23 (0.47%) for regulated issuers.
Federal Reserve Board, Average Debit Card Interchange Fee by Payment Card Network, https://www.federalreserve.gov/paymentsystems/regii-average-interchange-fee.htm
Brazil's cap covers only debit cards issued under domestic payment arrangements; credit cards and international transactions remain outside its scope.
Banco Central do Brasil, Estudos Especiais nº 106, https://www.bcb.gov.br/conteudo/relatorioinflacao/EstudosEspeciais/EE106_Resultado_regulatorio_cap_cartao_de_debito.pdf
Australia will extend an interchange cap to cards issued outside Australia from April 1, 2027, specifically to close a workaround: an online platform charges the customer's domestic card, then pays the Australian hotel with a foreign virtual card, exposing the merchant to interchange and scheme fees well above what the regulation targeted.
Reserve Bank of Australia, Review of Merchant Card Payment Costs and Surcharging – Conclusions Paper, March 2026, https://www.rba.gov.au/payments-and-infrastructure/review-of-retail-payments-regulation/2026-03/conclusions-paper/interchange-fees.html