Scheme Fee
What Is a Scheme Fee? Definition and How It Works
Definition
A scheme fee is a charge levied directly by card networks such as Visa and Mastercard on transactions processed over their rails, separate from interchange, covering the cost of network infrastructure, transaction processing, and card scheme services.
How it works
Scheme fees are distinct from interchange: interchange is the fee the acquirer pays to the issuer; scheme fees are what both the acquirer and issuer pay to the card network for operating the infrastructure that connects them. From the merchant's perspective, scheme fees appear as a cost within their total processing bill, typically bundled into MDR under blended pricing or itemized separately under interchange-plus pricing.
Scheme fees comprise multiple components. Authorisation fees are charged per authorisation attempt, regardless of whether the transaction is approved. Assessment fees (or service fees) are charged as a percentage of transaction value. Cross-border fees apply when the card is issued in a different country than where the transaction is processed. Data usage fees may apply for specific data services.
Visa and Mastercard publish their scheme fee schedules, though these documents are detailed and require careful interpretation. Fee levels are updated periodically and vary by market, transaction type, and volume tier. Some scheme fees have minimum monthly charges that apply to low-volume merchants.
Scheme fees are non-negotiable for individual merchants. Unlike acquirer margin, which merchants can negotiate, scheme fees pass through at the rates set by the network. Under interchange-plus pricing, scheme fees appear as a separate line item in the merchant's settlement statement, making them visible and attributable to individual transaction types.
Why it matters
Scheme fees are often invisible under blended pricing: merchants on blended MDR see a single rate that bundles interchange, scheme fees, and acquirer margin. Switching to interchange-plus reveals scheme fees as a separate cost line, often surprising merchants who assumed interchange was the only variable cost.
Cross-border scheme fees are significant: when a UK customer uses their card at a US merchant, the transaction attracts cross-border assessment fees from the card network, on top of higher interchange rates. Merchants with significant international volume should model scheme fee exposure by card geography in their cost analysis.
Transaction volume affects some scheme fees: certain scheme fee categories have tiered structures where higher-volume merchants pay lower per-transaction rates. Merchants near volume tier thresholds should review whether adjusting their transaction routing (for example, consolidating volume with one acquirer) could move them into a lower fee tier.
Scheme fees on declined transactions: authorisation fees are charged per authorisation attempt, not just per successful transaction. A high rate of authorisation failures, from card testing attacks or aggressive fraud rules, generates scheme fee exposure on transactions that generate no revenue.
With PXP
PXP itemizes scheme fees separately from interchange and acquirer margin in its settlement reporting under interchange-plus structures. Scheme fee data is available at transaction level, enabling merchants to analyse scheme fee exposure by card type, geography, and transaction channel.
Frequently asked questions
What is the difference between interchange and scheme fees?
Interchange is paid by the acquirer to the issuer as compensation for credit risk and fraud liability. Scheme fees are paid by both acquirer and issuer to the card network for operating the transaction infrastructure. Both appear as costs to the merchant in their processing bill, but they flow to different recipients and are set by different parties. Interchange rates vary by card type and MCC; scheme fees vary by transaction type and volume.
Can merchants negotiate scheme fees?
No. Scheme fees are set by card networks and are non-negotiable for individual merchants. Unlike acquirer margin, which is negotiable, scheme fees are a fixed cost of using card network infrastructure. The only indirect influence merchants have is through transaction volume tiers (higher volume may qualify for lower per-transaction rates) and by minimising declined authorisations that attract authorisation fees without corresponding revenue.
How do scheme fees appear on merchant statements?
Under blended pricing, scheme fees are embedded in the single MDR rate and not separately visible. Under interchange-plus pricing, scheme fees typically appear as a separate fee category on the settlement statement, broken down by fee type (assessment, authorisation, cross-border). Merchants on interchange-plus should request a scheme fee breakdown from their acquirer and verify it against published scheme fee schedules.
Do scheme fees apply to refunds?
Scheme fees on the original transaction are not recovered when a refund is processed. The authorisation and assessment fees paid when the original transaction was processed remain with the card network. Some networks also charge a small fee on refund transactions themselves. This non-recoverability of scheme fees on refunds is part of the total cost calculation for merchants with high refund rates.
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