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 by Region

MDR economics vary significantly across markets, shaped by regulation and local market structure:

EU / EEA: Consumer interchange is capped at 0.2% (debit) and 0.3% (credit) under the Interchange Fee Regulation, making EU card acceptance among the lowest-cost globally. Commercial card interchange is unregulated and substantially higher.

United States: Durbin Amendment caps debit interchange at ~0.05% + $0.21 for regulated issuers (banks with over $10B in assets), but credit card interchange is unregulated and averages 1.5–2.5% — among the highest globally.

Emerging markets (Asia, LatAm, Africa): Domestic debit transactions over local real-time rails (UPI in India, PromptPay in Thailand, PIX in Brazil, GPN in Indonesia) typically carry near-zero MDR as a policy choice. International card MDR in these markets ranges from 1.8% to 3.5% depending on card type and market.

Negotiation leverage: Merchants processing above $1M annually in most markets have room to negotiate the acquiring margin component of MDR. Volume, chargeback ratio, and card mix (debit-heavy reduces blended MDR) are the primary levers.