March, 2009

 

Backgrounder: Interchange

 

Toronto  --  Interchange is a fee that passes between acquirers (who handle card processing for merchants) and card issuers. 

 

Issuers receive interchange to compensate them for significant costs and risks borne in offering credit cards including interest-free periods, account management, credit losses, fraud protection and processing.

 

Acquirers charge merchants a merchant fee for credit and debit processing.  That fee is established by the acquirer, not MasterCard.  Interchange forms a portion, but not all, of that merchant fee for credit card transactions. 

 

• Canada has a well-functioning payments system that provides significant convenience and security to consumers and merchants.  It has continued to operate effectively and drive commerce despite a global credit crisis. 

 

• More than $240 billion in Canadian commerce is expedited on credit card systems annually.

 

• A merchant that processes a credit card transaction enjoys guaranteed payment even at a time of increasing consumer default rates. 

 

• Merchants benefit from increased sales, improved payment efficiency, reduced cash handling, customer convenience and satisfaction, ecommerce facilitation, international purchase handling, automatic currency conversion and settlement, among other benefits.

 

• Interchange is a fee that passes between acquirers (who handle card processing for merchants) and card issuers.  Issuers receive interchange to compensate them for significant costs and risks borne in offering credit cards including interest-free periods, account management, credit losses, fraud protection and processing.

 

• MasterCard receives no revenue from interchange.

 

• Consumers do not pay interchange fees nor merchant fees. 

 

• Merchants who choose to accept credit cards pay to participate in exchange for the benefits received.  The fee accounts for the multiple benefits received.  

 

• Merchants pay a merchant fee established by their acquirer, not MasterCard.  Interchange forms a portion, but not all, of that merchant fee. 

 

• MasterCard’s 2008 adjustment to interchange rates was the first in seven years.  Some rates were reduced.

 

 

 

• A merchant can obtain his MasterCard interchange rates via www.mastercard.ca/.  This information has been available for more than two years.

 

• When interchange was regulated in Australia, it led to reduced card services to consumers and there is no evidence that retailers passed on savings in reduced prices. 

 

• A reduction in interchange rates is no guarantee of price savings for consumers.

 

• Consumer enjoy significant benefits from credit card systems including: Zero Liability for unauthorized transactions, chargeback protection for goods and services not received, global acceptance in more than 210 countries, and rewards that extend the benefit of every dollar spent.

 

• The introduction of commercial credit card systems relieved the burden of merchants having to extend credit to customers.

About MasterCard Worldwide
MasterCard Worldwide advances global commerce by providing a critical economic link among financial institutions, businesses, cardholders and merchants worldwide.  As a franchisor, processor and advisor, MasterCard develops and markets payment solutions, processes approximately 21 billion transactions each year, and provides industry-leading analysis and consulting services to financial institution customers and merchants. Through its family of brands, including MasterCard®, Maestro® and Cirrus®, MasterCard serves consumers and businesses in more than 210 countries and territories. For more information go to www.mastercard.com.

For more information, please contact:
Jennifer Reed
MasterCard Canada
416-365-6664 / jennifer_reed@mastercard.com