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Modulr glossary

Interchange Fees

Interchange fees are transaction fees paid by merchants’ acquiring banks to card-issuing banks for processing card payments. These fees are set by card networks like Visa and Mastercard and vary based on transaction type, merchant category and region.

Applications

E-commerce:

Reduces fraud in online card payments by verifying the cardholder's identity

Banking and fintech:

Helps issuers and payment providers comply with Strong Customer Authentication (SCA) requirements.

Advantages

  • Enhanced security: Reduces unauthorised transactions by verifying that the genuine account holder is authorising the payment
  • Fraud prevention: Helps reduce chargebacks related to fraud.

Challenges

  • User Experience: Additional authentication steps can cause friction and increase checkout abandonment
  • Implementation complexity: Requires integration with card schemes and issuer systems.

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