What is Interchange++ or IC++?

What is Interchange++ or IC++?

IC++ or Interchange++ is a pricing model for credit card transactions that offers more transparency than other pricing models by providing a more detailed breakdown of costs. This type of pricing is most commonly used in Europe and North America and is available for Visa and Mastercard payments.

When a card transaction is processed through an acquirer, the merchant is charged several fees:

• the interchange fee, which goes to the card-issuing bank;
• the scheme fee, which goes to Visa or Mastercard (first +);
• and the acquirer fee (second +).

Larger merchants typically use Interchange++ pricing because it provides complete transparency on the fees for each transaction.

While IC++ potentially offering cost transparency and savings for high-volume marketplaces, requires more effort from merchants compared to simpler pricing models. 

This extra effort stems from the complexity of the structure itself, requiring merchants to understand various fee components and track costs. Additionally, IC++ might involve reconciliation challenges and technical integration with existing systems.

Interchange++ vs. Blended pricing

With Blended pricing, payment processors typically charge a variable fee of around 1% - 2.7% + a flat fee per transaction. This includes a markup that they charge to merchants. 

With Interchange++ pricing, clients can see the breakdown of fees from Acquirer fee, card scheme fees, and payment processing fees, making it easier to understand where charges are coming from than blended pricing.

💡 Note. Keep in mind that Interchange++ only applies to card payments. For other payment methods such as PayPal or Klarna, blended pricing is often applied. 

What are the benefits of Interchange++ pricing

Apart from transparency, Interchange++ offers a compelling set of advantages for merchants, particularly those processing a high volume of transactions. These benefits can translate into cost savings, improved business decision-making, and a more strategic approach to payment processing.

Potential for cost savings
Because Interchange++ is a pass-through model, merchants only pay the exact interchange fee that the card issuer charges for each transaction. This can be an advantage if a merchant processes a lot of debit card transactions, which generally have lower interchange fees than credit cards.

Knowing the breakdown can help identify savings opportunities if transactions are more geared towards cards with lower fees.

Data-driven decisions
With the detailed breakdown that Interchange++ provides, merchants can gain valuable insights into their transaction fees. They can use this data to make informed business decisions, such as analyzing which card types customers use most frequently and adjusting payment strategies to encourage the use of cards with lower interchange fees.

However, it's important to note that interchange++ also has its drawbacks. Because the fees are variable, it can be difficult to predict your processing costs with certainty. This can make budgeting a challenge for some businesses.