Payments Economics 11 min read
The MDR Stack: Reading Your Processing Statement Line by Line
Separate interchange, scheme charges, provider pricing, FX and ancillary fees, then measure reserve and payout balances without double-counting.
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Payments Economics
Compare like-for-like payment costs: match the transaction mix, pricing basis, FX conversion, settlement terms and operational fees before choosing a quote.
Briefings, grouped by decision
19 briefings in Payments Economics
The fee stack
Start here — the components of every processing statement, from interchange and scheme fees to acquirer margin and FX markup.
Payments Economics 9 min read
Card Scheme Fees Demystified: What's Inside the MDR
Understand the main layers in card acceptance costs and what the UK PSR found about scheme and processing fees charged to UK acquirers.
Payments Economics 10 min read
Interchange-Plus vs Blended Pricing: When Each Wins and What You Pay
Blended pricing hides the acquirer margin; interchange-plus exposes it. What each model costs, who each suits, and whether switching moves your effective rate.
Cost levers
Working capital, authorisation rate, surcharging, and the operational levers that move the effective cost of acceptance.
Payments Economics 10 min read
Working Capital Cost of Payments: Reserves, Settlement Timing, Float
Calculate the working-capital effect of payment reserves and payout delays using actual balances, contract terms and explicit assumptions.
Payments Economics 10 min read
What an Auth Rate Point Is Worth: Authorisation Optimisation Economics
One auth rate point is a revenue number, not an engineering metric. How to calculate what it's worth, what drives declines, and which interventions move it.
Contracts and negotiation
How to read PSP contracts, negotiate better rates, and evaluate BNPL unit economics.
Payments Economics 6 min read
Understanding PSP Contracts: What Merchants Never Read But Should
A breakdown of the clauses in payment service provider contracts that quietly drain merchant margins — and what to negotiate before you sign.
Other briefings in this topic
Payments Economics 7 min read
Do Payment Processors Charge for Failed Payments and Refunds?
A declined attempt, void, capture and refund can carry different processor charges. Compare the billed event, retained original fee and any new refund fee.
Payments Economics 10 min read
VAT and GST on PSP Fees: Why 'Payment Fee' Is Not a Tax Classification
Are PSP fees taxable, exempt or reverse-charged? The UK applies a functional test from CJEU case law; Singapore's statute names the acquirer-merchant leg.
Payments Economics 12 min read
The PSR Directed Visa and Mastercard on Scheme Fees — and It Is Not a Price Cap
Two final directions on card scheme and processing fees, from November 2026 and July 2027. What acquirers actually get, and what the PSR pointedly did not do.
Payments Economics 12 min read
Interchange Regulation by Market: What the Caps Actually Cover
Interchange caps in the EU, UK, US, Australia, Brazil, and India work differently. Cross-border, commercial cards, and scheme fees usually sit outside the cap.
Payments Economics 15 min read
Payment Routing KPIs: Auth Rate, Failover, Cost, and Recovery
The 15 payment routing metrics that matter: auth rate, failover, cost efficiency, latency, and recovery — the operator scorecard for routing teams.
Payments Economics 11 min read
The True Cost of a Chargeback: Unit Economics Beyond the Dispute Fee
A full chargeback costs 2–3x the transaction value when you account for lost goods, representment labour, VAMP thresholds, and reserve impact.
The MDR Stack
Separate the categories before comparing quotes
- Interchange
- Paid to issuing bank — sets the floor
- Scheme fees
- Paid to Visa / Mastercard, incl. cross-border surcharges
- Acquirer margin
- PSP revenue — negotiable via your PSP relationship
- FX markup
- Compare the conversion rate and any explicit conversion fee
- Ancillaries
- Chargebacks, 3DS, refunds, gateway, monthly
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Reference
Frequently asked
What is the difference between interchange and MDR?
Interchange is the issuer component of card acceptance costs. MDR is the merchant price, which can combine interchange, network charges and provider markup. The applicable components depend on the transaction and pricing model. Compare blended and interchange-plus quotes using the same transaction mix and included fees.
Why are PSP fees structured the way they are — what are the actual line items?
Identify interchange, scheme charges, provider markup, conversion charges and ancillary fees such as disputes, refunds, authentication or account fees. Not every quote includes the same categories. Ask which amounts are passed through, which are marked up, and what the provider can negotiate.
How do scheme fees work, and why are they rising?
Scheme charges can vary by network, transaction category, service, region and currency. To understand a change on your statement, identify the relevant fee schedule and compare it with the provider charge and transaction mix. An aggregate percentage does not establish which component changed or why.
What is a rolling reserve and how should I evaluate one in a contract?
A rolling reserve withholds funds under the provider contract. Check the calculation basis, reserve amount, holding period, release schedule and conditions for increases or freezes. Model the effect on cash availability rather than assuming a standard percentage or holding period.
How does FX markup affect the total cost of cross-border card acceptance?
Identify who performs each currency conversion and compare the quoted rate with a relevant benchmark at a comparable time. Include explicit charges and distinguish payment currency from settlement currency. Assess the scope for negotiation using your actual volume, currencies and provider terms.
UPI timing update (27 October 2026): NPCI’s 13 October notice deferred selected-merchant MDR until after Diwali, with the date to be notified separately. The prior 15 October start does not apply.
A comparable quote needs a transaction mix and a pricing basis. Separate interchange, scheme charges and provider markup; include conversion costs where a conversion actually occurs. Check whether dispute, refund, authentication and account fees are included. Model reserves and settlement timing as cash-flow terms as well as checking the processing price.
The structural dynamics in 2026 are applying pressure from opposite directions. Real-time rails compete with card acceptance, but their merchant cost is not uniformly zero: Pix merchant payments are market-priced, and India’s selected UPI P2M transactions above ₹2,000 gain a 0.4% fee from a post-Diwali date still to be notified, with exemptions and a cap. Simultaneously, card-scheme fees and interchange regulation continue to change. Operators need to decompose both card and account-to-account prices by transaction type before making routing or contract decisions.
The briefings in this topic are the operator’s reference for reading processing statements, negotiating PSP contracts, and understanding the structural economics behind BNPL, MoR, and real-time rail alternatives.