About Acquiring Pricing / IC++
There are several different ways to price acquiring, of which the two most common are Blended rates and IC++.
When a card payment is processed, money is transferred between the cardholder's bank (known as the card issuer) and the payment recipient's bank.
The card issuer charges a fee called interchange, abbreviated IC. In the EU, the size of the fee is regulated, so debit cards cost 0.20% and credit cards cost 0.30%. If cards issued outside the EU are processed, the fee may be higher, and the same applies to cards issued to businesses.
On top of interchange, the card scheme (VISA/Mastercard) also charges a fee known as a scheme fee. Finally, there is a fee from the acquirer itself – a so-called acquiring fee. The two "plusses" in IC++ therefore refer to the scheme fee and the acquiring fee.
When discussing IC++ pricing with your acquirer, you agree a price with the acquirer for what the acquiring fee should be. When a specific payment is received, the acquirer must pay interchange to the card issuer and scheme fee to the card scheme. These two items are passed directly to the store along with an acquiring fee.
With IC++, the store cannot know in advance how much the acquiring will cost in total, as there are different fees for debit and credit cards, and between card schemes.
Example: A store has agreed an IC++ price with its acquirer of 0.8%. A cardholder buys 250 kroner worth of goods in the store and pays with a Mastercard credit card. As it is a credit card, the interchange is 0.3%. Scheme fees can vary, but in this example we use 0.1%. The store must therefore pay a total of:
The alternative is to agree on blended rates, which is a fixed price for acquiring. It is typically divided into "within EU" and "outside EU" prices, as there is quite a large difference in interchange. The acquirer calculates the overall price based on statistics on average transaction sizes and fees, thus giving a single price. The acquirer must take into account that fees can vary, so to minimize risk the price may end up being slightly higher. On the other hand, you always know what you will pay.
Example: A store has agreed to pay in blended rates with its acquirer, and the price has been agreed at 1.25%. A cardholder buys 250 kroner worth of goods in the store with a VISA debit card. The store only needs to consider the price and must therefore pay 1.25% of 250 kroner, a total of 3.13 kroner.
Generally speaking, you can typically get slightly lower prices by entering into an IC++ agreement, as you take the risk regarding variations in interchange and scheme fees yourself. Typically, you need to have a turnover of more than 10 million before it makes sense to switch to an IC++ agreement.
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