This document discusses Interchange++ (IC++) pricing models for e-commerce transactions. It explains that IC++ separates interchange fees, scheme fees, and acquirer premiums for more transparency. While complex, IC++ pricing allows merchants to understand costs for different card types and transactions. The document provides examples of how IC++ fees vary and outlines both pros of transparency and cons of complexity versus blended rates. It concludes that merchants should evaluate their needs and discuss IC++ pricing with acquirers and payment providers.

2. 2
Understanding E-Commerce Pricing:
The pros and cons of IC++
Private & Confidential | Understanding E-Commerce Pricing: The pros and cons of IC++
The information, materials and opinions contained in this presentation are for general information purposes only, are not
intended to constitute legal or other professional advice, and should not be relied on or treated as a substitute for specific
advice relevant to particular circumstances. The information is intended for the recipient's use only and should not be cited,
reproduced or distributed to any third party.

3. 3
IC++ Pricing: Why is this important?
• As of June 9th 2016, all merchant agreements in the EEA should be
offered with Interchange++ (IC++) pricing
• Blended rates should only be offered if, as a merchant, you
formally refuse an IC++ pricing
• Navigating through fees imposed by the Card Networks can be
challenging. This session aims to help you:
1. Evaluate and select the pricing model that best suits your needs
2. Better understand merchant agreements and make the right
strategic decisions when expanding into new markets
3. Help create long-term value for your e-commerce business
Private & Confidential | Understanding E-Commerce Pricing: The pros and cons of IC++

4. 4
Scope
Private & Confidential | Understanding E-Commerce Pricing: The pros and cons of IC++
This presentation will focus on VISA and
MasterCard specifically, as:
• They are 4-party schemes
(Cardholder, Merchant, Acquirer,
Issuer)
• They still represent ~90% of all e-
commerce volume in Europe
Please Note
• Interchange and fees are an extremely complex topic. This
presentation will therefore include a few simplifications
• Whilst Visa and MasterCard have an overall similar approach to IC
and fees, they have each their own specificities that we will not cover
in detail today

5. 5
Unbundled rates: what does IC++ stand for?
IC
Private & Confidential | Understanding E-Commerce Pricing: The pros and cons of IC++
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IC = Interchange: The commission the card issuer
(traditionally, a bank) receives for each transaction
made using the card
Fees charged by Card Networks to the acquirer for
their scheme management activities. As standard,
these are passed on to the merchant
Premium of your acquirer / PSP to cover its other
costs of doing business and margin

6. 6
Interchange vs. “Merchant Discount Rate”
Private & Confidential | Understanding E-Commerce Pricing: The pros and cons of IC++
Interchange: fee paid by a merchant's bank (acquirer) to a cardholder's
bank (issuer) to compensate that issuer for the value and benefits the
merchant receives when they accept electronic payments
• Intended to distribute value across stakeholders throughout
the value chain to promote electronic payments, security and
convenience to benefit merchants, governments and
consumers
“Merchant Discount Rate”: typically a blended rate approach to all
fees paid by merchants to accept card payments
• It combines interchange, scheme fees and acquirer/PSP
premium

7. 1. Type of card
• Consumer vs. Commercial
• Immediate/Deferred Debit, Credit, Prepaid,
Charge, etc.
• “Base”, Premium, Super Premium
2. Geography
• Issuer country/Merchant country, categorised
as: Domestic, European*, International
7
4 Primary Factors Impacting Interchange Rates
Private & Confidential | Understanding E-Commerce Pricing: The pros and cons of IC++
* Visa and MasterCard have a number of sub-regions within Europe
Interchange ranges from ~0.2% for Domestic Immediate Debit
transactions in EEA, to ~2.25% for some International Commercial cards
transactions

8. 4. Industry
• Some countries have dedicated IC rates for certain specific
industries/verticals (e.g. Charities, government entities, airlines,
supermarkets, etc.)
3. Transaction type
• Secured (3D Secure) vs. non-secure
• E-commerce vs. contactless vs. PIN, etc.
8
4 Primary Factors Impacting Interchange Rates (cont.)
Private & Confidential | Understanding E-Commerce Pricing: The pros and cons of IC++

9. 9
What are Scheme fees?
Private & Confidential | Understanding E-Commerce Pricing: The pros and cons of IC++
Scheme Fees are charged by Card Networks for their scheme
management activities to the acquirer, and as a standard are passed on to
merchants
They include three relevant fee types:
1. Fees linked to the overall transaction volume
2. Fees linked to the type of transaction (e.g. e-commerce, secured,
recurring, MOTO, cross-border, etc.)
3. Other fees: country specific, currency premia, etc.
Scheme fees can vary greatly based on the transaction scenario
(examples shown later in the presentation)

10. 10
What is the premium?
Private & Confidential | Understanding E-Commerce Pricing: The pros and cons of IC++
The premium constitutes the acquirer’s / PSP’s revenue and covers:
• Dozens of fees that are not a part of Scheme fees, but are
nonetheless charged by the Schemes to the acquirer
• The acquirer’s / PSP’s other costs of doing business and
margin
In addition to the premium, transaction and chargeback fees are also
quite common. Those cover:
• Gateway costs and dispute management costs that your
merchant account may be generating

11. 11
IC++: Illustrative Pricing Examples
Private & Confidential | Understanding E-Commerce Pricing: The pros and cons of IC++
1. UK merchant, UK Consumer Immediate Debit card, unsecured
IC: 0.20%
Scheme fees:
~ 4-15 bps
Premium: %
2. UK merchant, Swiss Card, Consumer Immediate Debit card, unsecured
IC: 1.20%
Scheme fees:
~ 8-20 bps
Premium: %
Note: for MasterCard, using a generic industry and currency
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12. 12
IC++ Illustrative Pricing Examples (cont’d)
Private & Confidential | Understanding E-Commerce Pricing: The pros and cons of IC++
3. International transaction, Standard Consumer card, unsecured
IC: 1.60%
Scheme fees:
~ 50-80+ bps
Premium: %+ +
4. International transaction, Super Premium Consumer card, unsecured
IC: 1.98%
Scheme fees:
~ 50-80+ bps
Premium: %+ +
Note: for MasterCard, using a generic industry and currency

13. 13
Pros of IC++
Private & Confidential | Understanding E-Commerce Pricing: The pros and cons of IC++
 Transparency: merchants know exactly who charges for what
 The merchant only pays what’s relevant for his type of transactions,
with a constant premium
 Merchants are in a better position to negotiate when moving from one
acquirer to another

14. 14
The Cons of IC++
Private & Confidential | Understanding E-Commerce Pricing: The pros and cons of IC++
✗ The exact processing costs are unknown until you actually begin
processing (and vary over time)
✗ Your acquirer is likely to transfer Scheme Fee changes on to you
✗ Overall more complex to track and reconcile

15. Conclusion
Private & Confidential | E-Commerce Success: What do I need from my payment service provider?
• IC++ pricing is a complex topic
• There is no perfect formula – every business will have its own needs
• Only work with a cost base you understand
• Talk to your acquirer/service provider to understand what is included
in its IC++ pricing framework, and how it could benefit you

16. 16Private & Confidential | Presentation title
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