As a Mastercard merchant, it's important for you to know the economic model that underlies payment card transactions. Although Mastercard interchange rates have generally been available to merchants by request to acquirers and other card acceptance providers, we want the process to be as transparent as possible.
Financial institutions that provide card acceptance services to merchants are typically referred to as "acquirers." Mastercard has no involvement in acquirer and merchant pricing policies or agreements. Interchange fees are one component of the Merchant Discount Rate (MDR) established by acquirers, which is paid by merchants to acquirers in consideration for card acceptance services.
How rates are determined
Mastercard interchange rates are established by Mastercard, and are generally paid by acquirers to card issuers on purchase transactions conducted on Mastercard cards. Interchange rates are only one of many cost components included in a MDR, and are a necessary and efficient method by which Mastercard maintains a strong and vibrant payments network. Setting interchange rates is a challenging proposition that involves an extremely delicate balance. If interchange rates are set too high, such that they lead to disproportionately high MDRs, merchants' desire and demand for Mastercard acceptance will drop. If interchange rates are set too low, card issuers' willingness to issue and promote Mastercard cards will drop, as will consumer demand for such cards. In response to these competitive forces, we strive to maximize the value of the Mastercard system (including the dollars spent on Mastercard cards, the number and types of cards in circulation, and the number and types of merchants accepting Mastercard cards) by setting default interchange rates at levels that balance the benefits and costs to both cardholders and merchants.