Mastering Interchange: Strategies to Minimize Costs with Finix’s Infrastructure

Interchange fees are like a toll paid by the merchant’s bank (the acquiring bank) to the cardholder’s bank (the issuing bank) each time a card transaction crosses the “bridge” between buyer and seller. Just as a toll helps maintain the road infrastructure, these fees help cover the costs of processing, fraud prevention, and credit risk associated with each transaction. Though largely invisible to consumers, interchange fees play a vital role in keeping the payments ecosystem running smoothly. Set by card networks like Visa, Mastercard, Discover, and American Express, these fees are typically structured as a percentage of the transaction amount plus a fixed fee. They’re designed to cover the costs associated with processing the transaction, mitigating fraud, and managing credit risk.

Several variables determine the exact interchange fee applied to a transaction:

1. Business Type Certain industries—such as travel or online services—may face higher interchange fees due to elevated fraud risk or atypical transaction behavior.

2. Region and Transaction Size Interchange fees can vary by location, with international transactions often incurring higher costs due to added currency conversion and risk. Additionally, larger transactions may qualify for lower rates under specific interchange programs, especially in B2B contexts.

3. Transaction Method Card-present (in-person) transactions generally carry lower fees than card-not-present (online or over-the-phone) payments, as the latter are considered higher risk.

4. Card Type Credit cards usually come with higher interchange fees than debit cards because of the increased credit risk and consumer protections involved.

5. Card Brand and Rewards Premium, rewards, or business cards often have higher interchange fees, as they fund loyalty programs and cardholder benefits.

These fees are set by card networks and reviewed periodically—typically in April and October—meaning businesses must stay informed to manage their processing costs effectively.

Interchange fees are a significant component of the total cost merchants pay to process card transactions. They are part of the broader Merchant Discount Rate (MDR), which also includes assessment fees paid to card networks and markup fees charged by payment processors, acquiring banks, or payment facilitators.

Here’s a breakdown of the Merchant Discount Rate (MDR):

• Interchange Fees: Paid to the issuing bank

• Assessment Fees: Paid to the card networks

• Markup Fees: Paid to the acquiring bank, processor, or payment facilitator

Understanding this breakdown is crucial for businesses aiming to optimize their payment processing costs.

At Finix, we provide modern payment infrastructure that empowers businesses to accept, manage, and optimize payments with greater transparency and control. While card networks set interchange fees, we equip platforms with the tools to better navigate and reduce their impact through strategic pricing models and data enhancements.

Transparent Pricing Models

Finix’s direct pricing model is subscription-based, offering full transparency by passing interchange fees through to merchants with no markup. This approach eliminates hidden costs and ensures businesses only pay the true cost of processing. As a market-leading model, it's a key differentiator. Finix offers a variety of pricing structures designed to meet the unique needs of different business models:

• Interchange Plus (IC+) Pricing: Offers full transparency by separating interchange fees from processor pricing, so businesses can see exactly where every dollar goes. This pricing model is especially beneficial for high-volume businesses, SaaS platforms, and B2B companies that want to closely monitor their processing costs, qualify for lower interchange rates (e.g., via Level 2/3 data), and scale with predictable margins.

• Flat-Rate Pricing: Simplifies billing with a single, predictable rate, ideal for platforms seeking ease of reconciliation, though it may obscure granular fee details.

• Custom Pricing: Tailored to your specific use case, whether you're managing high-volume transactions, enabling B2B payments, or scaling across industries. Finix offers a Starter Plan for businesses processing under $1 million annually with flat per-transaction fees and a $250 monthly platform fee. Larger or more complex businesses can access a Custom Plan with pricing built around their volume, industry, and operational needs. This flexibility ensures cost efficiency and scalability at every stage of growth.

Finix’s Fee Profiles provide platforms and direct merchants with granular control over how payment processing fees are structured and applied. Whether you’re managing a portfolio of sub-merchants or processing payments for your own business, Finix offers the flexibility to tailor pricing based on merchant type, transaction method, geography, and more.

This means you can:

• Pass Interchange Fees to Sellers: Decide whether to absorb interchange costs or transparently pass them through to sub-merchants, ensuring clarity and alignment with your revenue model.

• Set Fixed or Percentage-Based Fees: Choose between consistent flat-rate pricing or dynamic, percentage-based models that scale with transaction volume or vary by merchant segment.

• Manage Cross-Border Fees: Adjust for international payments by incorporating regional pricing differences, foreign exchange fees, and country-specific interchange rates.

• Support Direct Merchant Pricing: For businesses using Finix as a direct merchant, our pricing model—such as Interchange Plus (IC+)—offers transparent, line-item visibility into processor and card network costs. This allows you to analyze your margins, optimize for lower-cost transactions (e.g., via Level 2/3 data), and better forecast your payment-related expenses.

This level of customization ensures that your pricing strategy isn’t just cost-efficient, but also optimized for scalability, compliance, and your unique operational needs, whether you’re running a multi-merchant platform or processing transactions directly.

While interchange fees are set by the major card networks and typically non-negotiable on a per-transaction basis, businesses can still take the wheel and steer their payment costs in a more favorable direction. Think of interchange fees like the weight on a car’s tires—they’re unavoidable, but with the right strategies and tools, you can reduce friction and improve performance. By embracing modern, customizable payment infrastructure like Finix, businesses can optimize their payment operations, boosting efficiency and improving margins along the way.

1. Encourage Debit Card Usage Debit card transactions typically come with lower interchange fees than credit cards, particularly rewards or commercial cards. By incentivizing customers to use debit cards through checkout messaging or discount incentives, you can meaningfully lower your average cost per transaction.

2. Implement Level 2 and Level 3 Data Processing B2B and B2G businesses can qualify for lower interchange rates by submitting enhanced transaction data, such as tax amounts, invoice numbers, or customer reference codes. This is especially beneficial when accepting corporate or purchasing cards. Finix supports Level 2 and Level 3 data processing, enabling platforms to automatically qualify for lower fee tiers.

3. Choose the Right Payment Processor Not all processors are created equal. Some hide interchange fees behind flat-rate pricing models or lack tools for optimization. Finix offers transparent Interchange Plus pricing and granular control over fee structures, so you always know exactly what you're paying for and why.

4. Optimize Transaction Methods Card-present (in-person) transactions are considered lower risk than card-not-present (online or phone) transactions, and therefore incur lower interchange fees. Whenever possible, design your payment flows to support chip, tap, or swipe transactions to reduce fraud risk and processing costs.

5. Review Your Processing Statements Make it a habit to regularly audit your processing statements. Understanding how much you’re paying in interchange, processor markups, and additional fees can help you spot anomalies or opportunities for optimization. Finix’s transparent reporting makes this process straightforward and actionable. Most competitors can increase their price with a 30-days notice. Be sure to watch out for price increase notices on the bottom of your current statement.

6. Settle Transactions Quickly Faster settlement times can reduce transaction risk and lower associated fees. It also improves cash flow. With Finix, you can configure settlement windows that match your business needs while staying compliant with card network requirements.

7. Apply a Surcharge or Service Fee Where permitted by law, passing a surcharge or service fee to customers can help offset processing costs. This is particularly common for high-ticket transactions or in industries with tight margins. Finix provides the flexibility to configure these fees within your checkout experience, ensuring transparency and compliance.

8. Regularly Review Fee Structures Card networks typically adjust interchange rates twice a year. Stay informed about these changes and evaluate how they affect your cost structure. With Finix’s customizable fee profiles, you can quickly adjust your pricing strategies to maintain profitability.

Ready to take control of your business margins and payment processing?

Contact Finix today to learn how we can help you manage interchange fees and streamline your operations.​