How card payment networks make money

A card payment involves four parties: the cardholder, the merchant, the merchant's acquiring bank, and the cardholder's issuing bank. The card network sits in the middle, routing authorisation and settlement messages and setting the rules everyone follows.

Where the fee goes

1. Interchange: paid by the acquirer to the issuer. Usually the largest slice.
2. Scheme fees: paid to the network for switching, authorisation and licensing.
3. Acquirer margin: the processor's own charge for onboarding, risk and settlement.

The merchant sees the total as the merchant discount rate. Only the third component is genuinely negotiable with a processor.

Why interchange is regulated

Because merchants cannot realistically decline the dominant networks, interchange is not set by ordinary competition. The EU's Interchange Fee Regulation caps interchange on consumer debit and credit transactions, and the UK retained comparable caps. In the United States, the Durbin Amendment caps debit interchange for larger issuers, while credit interchange remains uncapped and has been the subject of long-running litigation.

What this means for fintech

Interchange is the revenue line beneath a large share of consumer fintech. It explains why app-based accounts push card usage, why business models differ sharply between capped and uncapped markets, and why account-to-account payment rails — which bypass card interchange entirely — attract both merchant enthusiasm and incumbent resistance.