MDR

Merchant Discount Rate — commonly abbreviated MDR — is the composite fee deducted from each card transaction before the merchant receives their settlement. It is not a single fee but a bundle of three components charged by different parties in the payment chain.

MDR Components

Interchange is the largest component, typically 60–80% of total MDR. It is paid by the acquirer (or PSP) to the card-issuing bank as compensation for credit risk and funding costs. Interchange rates are set by the card networks (Visa, Mastercard) and vary by card type, merchant category code (MCC), and geography.

Scheme fees (also called network fees or assessment fees) are paid to Visa or Mastercard for use of their payment network. These fees are generally 0.10–0.25% of transaction value and are largely non-negotiable.

Acquiring margin is the commercial margin retained by the PSP or acquirer. This is the fee component that is negotiable for merchants with sufficient processing volume.

Blended vs. Interchange-Plus Pricing

PSPs offer MDR in two main structures:

• Blended pricing: A single flat rate regardless of card type. Simpler to understand but typically more expensive for merchants whose mix includes predominantly debit or basic credit cards.
• Interchange-plus (cost-plus) pricing: The merchant pays actual interchange plus a fixed acquiring margin. More transparent and usually lower effective cost for high-volume merchants.

MDR in Southeast Asia

MDR varies significantly across Southeast Asian markets. In markets like Thailand and Indonesia, domestic debit transactions over local networks (PromptPay, GPN) carry near-zero MDR. International card MDR in the same markets typically ranges from 1.8% to 3.0% for standard credit cards, higher for premium or foreign-issued cards.

Merchants processing above $1M annually in any SEA market typically have room to negotiate the acquiring margin component of MDR, reducing effective rates by 0.2–0.5 percentage points.