I believe most PIN-based payment systems end up being a lot cheaper than that, and since this is MasterCard we're talking about, maybe you should look at a network like Maestro (which is big in the EU). Unfortunately it's really hard to pin down exact rates with a casual Google search...

In Europe bank card retail purchases and most debit card withdrawals (some exceptions) are free.

Free for the end consumer yes, but the retailer probably pays some kind of fee?

Yes, flat monthly fee.

Nope. At least in Germany, it's 0.3% and a minimum of 8 cents per transaction, plus the monthly infrastructure fee.

This is for EC?

I believe the new credit interchange for EU is similar.

Yes

Wow, could you share what sort of price range is that? I never knew the debit cards transaction were free payment process.

In Denmark the charge for a debit card is 0.20 usd plus 0,1% of the transaction for purchases above approximately 18 usd.

It's is a smaller fixed amount for smaller purchases.

Well that his solution to the problem, isn't it? ;)

He wants that .5% to 1.5% to go to him instead!

Interchange is all over the place. It can easily go to 2.5%.

http://www.mastercard.com/us/company/en/whatwedo/interchange... http://www.mastercard.com/us/company/en/whatwedo/interchange... http://www.mastercard.us/merchants/support/interchange-rates... http://www.osc.nc.gov/secp/schedulec-visaandmastercardiqda.p...

The rules are very complicated and arbitrary. To give you an example: cashback interchange in Poland is negative (acquirer get money from the issuer), intradomain interchange is positive (issuer gets money from the acquirer) and interdomain interchange is zero.

There is no way explain interchange without using the words yacht, golf course, hookers and cocaine.

Doesn't that depends on countries? Last time i heard the US credit card payment system was some ridiculously expensive rate at 2 - 3%.

The US rate for credit card (and check card) processing is indeed very high! The upside of this is that it makes a variety of financial firms (banks and credit card companies) quite interested in issuing them. For instance, some banks will offer no-fee bank accounts with direct deposit and a certain minimum number of monthly check-card purchases (in lieu of requiring larger minimum balances). Some providers will also explicitly send a significant fraction of these fees right back to the customer as "cash back", airline-miles, or similar rewards.

(The downside is obvious. The dynamics of the interplay are interesting. I wonder if there are any good studies.)

You actually negotiate the interchange fee somewhere along the process of getting a merchant account. If you're a "Level 1" merchant you pay less and smaller merchants pay more, American Express and Discover charge more, if you're in a dodgy business coughPORNcough you pay quite a bit more. I think that Visa or MasterCard will increase your interchange fee if your customers do too many chargebacks and disputes, too.

I'm out of touch with that any more, but 1.75% used to be a very good interchange rate maybe 10 years ago.