Interchange
Interchange is the fee the card-issuing bank charges on each transaction, set by the card networks and passed through to the merchant as part of the processing cost. It is a floor the acquirer cannot go below, which is why it anchors any honest pricing conversation.
Interchange is largely fixed, so the part of your rate a provider can actually compete on is the margin above it. An interchange-plus quote makes that margin visible, while a blended rate hides it, which on high volume can mask a spread worth thousands a month.
The Merchant Discount Rate is the total percentage an acquirer or PSP charges a merchant on each card transaction, bundling interchange, card-scheme fees, and the processor’s own margin.
An acquirer is the bank or financial institution that processes card payments on a merchant’s behalf, settling funds from the card networks into the merchant’s account.
A Payment Service Provider aggregates payment processing for merchants, typically holding the direct acquirer relationship itself and onboarding merchants under its own risk appetite, rather than each merchant applying to an acquirer directly.
Settlement is the transfer of cleared transaction funds from the card network or payment rail into the merchant’s bank account, net of fees, chargebacks, and any reserve withheld.