Payments glossary
Interchange
Interchange is the fee paid on every card transaction by the merchant's acquirer to the customer's issuing bank, at rates set by the card schemes. It is usually the largest component of the merchant discount rate and is passed on to merchants in their pricing.
What interchange is and who pays it
On every card transaction, the merchant's acquiring bank pays a fee - interchange - to the customer's issuing bank, at rates set by the card schemes. The acquirer recovers it from the merchant inside the merchant discount rate, which makes interchange usually the single largest component of what merchants pay to accept cards. It flows to issuers as compensation for the costs of issuing: funding the cardholder, absorbing fraud losses, and guaranteeing payment to the merchant's side of the transaction.
Interchange in South Africa
South Africa handles interchange with unusual formality: the rates applied locally have been determined through an interchange determination process overseen by the South African Reserve Bank, rather than left purely to scheme discretion. Rates still differ by card type and channel - debit versus credit, in-person versus online, consumer versus commercial cards - so a merchant's effective interchange cost depends on the mix of cards their customers present.
Why merchants should care
Interchange is non-negotiable, but it defines the floor under all card pricing: no provider can charge less than interchange plus scheme fees without losing money. Interchange-plus pricing passes the actual interchange through and adds a disclosed margin; blended pricing rolls everything into one rate. Knowing the split tells you whether a quote is competitive - and LekkaPay's transaction reporting itemises fees so merchants see the components rather than a blended mystery number.
Frequently asked questions
Who actually receives interchange?
The customer's issuing bank. On every card transaction the merchant's acquirer pays interchange to the issuer, then recovers it from the merchant as part of the merchant discount rate. Interchange compensates issuers for funding cardholders, absorbing fraud losses and guaranteeing payment.
Who sets interchange rates in South Africa?
The card schemes set interchange, and in South Africa the applicable rates have been determined through an interchange determination process overseen by the South African Reserve Bank - a local specificity that distinguishes SA from markets where schemes set rates unilaterally.
Can merchants negotiate interchange?
No - interchange is fixed by scheme category, not by merchant. What merchants can negotiate is the rest of the merchant discount rate: the acquirer's and payment provider's margin above interchange and scheme fees. That is why understanding the interchange component matters when comparing quotes.
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