MDR vs Interchange Fee
MDR and Interchange Fee are easy to mix up. Here are both definitions from the HighRisk Media glossary side by side.
Comparison table
| Term | MDR | Interchange Fee |
|---|---|---|
| Full name | Merchant Discount Rate | — |
| In short | MDR (Merchant Discount Rate) is the fee that an acquirer or payment service provider deducts from the merchant on each card or other payment method transaction. | Interchange is a fee that the acquirer pays to the issuing bank for each card-not-present or card-present transaction. It is usually part of the MDR that the merchant ultimately pays. |
| Verticals | Fintech | Fintech |
What is MDR?
MDR is the percentage of the transaction amount that the receiving party keeps for accepting and processing a payment. It covers the interchange fee, card scheme fees, and the margin of the acquirer or PSP. The rate is fixed in the merchant agreement and can be a single flat rate for all transactions or differentiated by card type, country, MCC, and risk level.
What is Interchange Fee?
Interchange is an interbank fee that is deducted from every card payment. The merchant's bank (the acquirer) pays it to the cardholder's bank (the issuer). The merchant does not see it directly, but it is included in the total rate the merchant pays for accepting cards.