Maximizing Revenue for European E-commerce Acquirers: Effective Strategies for Today’s Market

By Sergey Lebedev, Co-Founder of Torus

Imagine navigating a labyrinth where each turn presents a new fee, regulation, or payment method. This is the reality for acquirers today, making it essential to adopt transparent and precise pricing models. Since there is no fixed algorithm or method for allocating payment network fees to transaction levels, this underscores the need for acquirers to optimize their fee management strategies. This article explores how the Interchange++ (IC++) model can provide greater transparency and control over scheme fees, helping acquirers improve profitability while staying compliant with regulatory requirements.

Current Trends in European E-commerce Acquiring

European e-commerce is driven by the massive shift towards cashless transactions. Card payments have kept the lion's share so far — 56% of all non-cash transactions in the euro area. As a result, acquirers have to constantly monitor card-related costs. 

The MSC (editor's note — Merchant Service Charge) has been through several changes, particularly since the so-called Interchange Fee Regulation (IFR) broke in 2015: interchange fees cap at 0.2% for consumer debit cards and 0.3% for credit cards. While interchange fees were to be reduced, as evidenced in savings of merchants amounting to approximately €1.2 billion per annum by the IFR, it introduced increased complexity on scheme fees in the card network.

Retailers have complained about the proliferation of scheme fees combined with a lack of transparency. They say it has eroded the savings they had expected from the interchange fee caps imposed under the IFR.

Understanding the Interchange++ (IC++) Model

The IC++ model provides a detailed breakdown of transaction costs, comprising three main components:

• Interchange Fees: Fees set by card networks and paid to the card-issuing banks.

• Scheme Fees: Fees charged by the card schemes for processing transactions.

• Acquirer Markup: The margin added by the acquirer for the services provided.

This granular approach allows merchants to see exactly where their money goes, fostering trust and enabling more strategic financial planning.

Challenges in Implementing the IC++ Model

Despite its advantages, the IC++ model presents several challenges:

• Complexity in Fee Allocation: There is no standardized method for allocating payment network fees at the transaction level. This lack of uniformity can lead to variability, where identical transactions incur different scheme fees depending on the acquirer.

• Dynamic Fee Structures: Card schemes frequently update their fee structures, introducing new fees or modifying existing ones. 

• Regulatory Compliance: Staying abreast of regulatory changes is crucial. The European Commission's Instant Payments Regulation mandates that, as of January 9, 2025, payment service providers in the euro area must charge the same or lower fees for instant payments as for regular transfers. Additionally, providers that do not yet offer instant payments in euro are required to enable their clients to receive them.

Given these challenges, acquirers must adopt proactive strategies to manage costs and maintain profitability.

Strategies for Effective IC++ Implementation and Profitability Optimization

To navigate these complexities, acquirers can adopt several strategies:

1. Calculation of Scheme Fees Based on Transaction Volume: By analyzing transaction volumes, acquirers can more precisely determine applicable scheme fees, leading to more accurate pricing models.

2. Reconciliation of Predicted Fees with Actual Data: Regularly comparing estimated fees with actual charges helps identify discrepancies, allowing for timely adjustments and improved accuracy in fee assessments.

3. Accounting for Unpredictable and Fixed Scheme Fees: Incorporating both variable and fixed fees into pricing models ensures a comprehensive understanding of costs, facilitating better financial planning and pricing strategies.

What’s more, the Federal Reserve has announced 2025 fee changes and strategic service enhancements effective January 1, 2025, reflecting a focus on providing a fully integrated product suite that offers speed, resilience, and choice. And although the year has already brought regulatory updates and even court rulings around payment fees, the overall trend remains clear — the system is moving toward greater transparency and efficiency.

Yet, precision in fee allocation is important. There is no fixed algorithm or method for allocating payment network fees to transaction levels. Each acquirer determines scheme fees independently, resulting in varying charges for identical transactions with the same Interchange and acquiring markup. While the importance of card payments remains significant, payment network costs are on the rise. These increases are undermining the impact of the Interchange Fee regulation introduced in 2015.

Summing Up

The Interchange++ model has emerged as a tool for European e-commerce acquirers seeking to balance profitability with transparency in a complex payments ecosystem. While interchange fee caps under the IFR initially brought cost reductions for merchants, the evolving structure of scheme fees and ongoing regulatory scrutiny signal that acquirers must take a proactive approach to managing their transaction costs.

To remain competitive, acquirers need to refine their pricing strategies with a precise understanding of scheme fee allocations, reconcile predicted and actual costs, and ensure compliance with evolving regulations such as the European Commission’s Instant Payments Directive. Strategic cost management through the IC++ model is not just a financial necessity but a long-term competitive advantage.

About Torus

Torus is an award-winning SaaS platform that helps banks and acquirers transform fee management into a source of profit. With automated analysis of Visa and Mastercard scheme fees, daily transaction-level profitability insights, and predictive pricing tools, Torus empowers financial institutions to recover hidden losses and achieve up to 50% higher profitability across their card portfolios.

www.torusadvisors.com