When negotiating an acquiring contract, it’s widely believed that fees like the interchange and scheme assessments aren’t negotiable. And in most cases, that’s true. They’re set by the card schemes and passed on by the acquirer.
But… there are angles to this!
While these fees themselves are fixed, how they’re applied, bundled, or passed through in a merchant’s contract is where things can get interesting.
There are a couple of reasons for that.
First, the interchange fees (i.e. the fixed cost paid by the acquirer to the issuer) take on a different dynamic where the acquirer and issuer are the same entity. This is known as an on-us transaction. Since the fee is retained within the institution, it alters the cost structure and margin potential considerably. At scale, this can make a big difference as it gives the acquirer more flexibility in how they price acquiring for certain types of volume.
The assessment fees, which are the fees paid by the acquirer to the networks include both fixed and volume-based components. Merchants can’t negotiate scheme fees directly but the acquirer they choose can make a difference here. Indeed, acquirers with strong volume in a sector (i.e. travel, retail, gaming) often access better fee tiers. This gives them more flexibility to price, bundle, or absorb costs in merchant contracts.
Processing volume matters, of course, but so does the context. For example a £10M in low-cost domestic debit is not the same as £10M in high-margin cross-border volume! Sometimes it is less about how much a merchant processes, and more about how that volume performs and what it signals to the acquirer. Naturally, a merchant’s leverage also grows the more volume they can shift to an acquirer.
So on the face of it the interchange and assessment base fees may seem fixed but really there are different ways acquirers shift the economics, where the strategic value of the relationship justifies it. Beyond the pricing structure, they may flex on FX margins, settlement terms, etc…
Even when an acquirer appears to be practically giving away acquiring, it’s rarely accidental. Understanding the levers on both sides is where the real opportunity lies.
#paymentexperts any perspectives to share on the #acquiring commercial models 🎤?
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