What is the difference between interchange++ and blended pricing?

Interchange++ passes interchange and scheme fees through at cost and adds a fixed margin, so the rate varies with the card. Blended pricing charges one flat rate for every card. Blended is simpler and usually more expensive; interchange++ is cheaper for most card mixes but requires reading a detailed statement.

IC++, IC+ and blended: how do the models differ?

Interchange++: the merchant is invoiced interchange at cost, scheme fees at cost, and a fixed margin. Blended (or flat): one rate for all cards, sometimes with two or three tiers. The provider sets the rate above its expected average cost and keeps the difference on cheap cards, while absorbing the loss on expensive ones.

Who benefits from each model?

Blended pricing moves cost risk from the merchant to the provider, and is paid for with a premium. It suits small merchants with low volume and no finance team. Interchange++ moves the risk back to the merchant, and the savings with it: a European retailer with a 0.2% debit-heavy mix pays its real cost plus a thin margin instead of a 1.4% average built for the worst case. The one case where blended can be cheaper is a mix dominated by premium, commercial or cross-border cards.

More detail in our #PayDecoding episode on Interchange++.