What is an interchange fee? How card payments are split, and who earns what

Who's involved in a card payment

1. The cardholder, who pays.
2. The shop, which takes the payment.
3. The acquirer, the firm that processes card payments for the shop.
4. The card scheme, such as Visa or Mastercard, which runs the network.
5. The issuer, the bank or firm that gave the cardholder the card.

Where interchange fits

The shop pays its acquirer a fee for each payment. Out of that, the acquirer pays interchange to the card issuer and a scheme fee to the card network, and keeps the rest as its own margin.

The UK caps

For most UK consumer card payments, interchange is capped at 0.2% of the payment on debit cards and 0.3% on credit cards. Business cards, and some cross-border payments, aren't covered by the same caps and are often higher.

Why it matters for a new money app

If you give your customers their own branded cards, you're on the issuer side, so part of the interchange on their spending can come to you through your card partner. How much depends on your partner's terms, so ask for that in writing before you launch.