Definition
The MDR (Merchant Discount Rate) is the total fee a merchant pays its acquiring PSP for each card transaction, as a percentage of the amount (sometimes plus a fixed fee).
It breaks down into three building blocks:
MDR = Interchange + Scheme fees + Acquirer fee
- Interchange — paid to the issuing bank.
- Scheme fees — paid to the network (Visa, Mastercard, CB, Amex).
- Acquirer fee — the acquiring PSP's margin (Stripe, Adyen, Worldline, Mollie).
The "interchange++" model: everything is transparent
On enterprise contracts (and optionally with modern PSPs), the merchant sees the real breakdown: actual interchange (variable by network, card type, geography), actual scheme fees (potentially dozens of line items) and a fixed acquirer fee. For small merchants, it is usually blended: a single rate that lumps everything together.
The IFR caps (EEA)
The IFR (EU 2015/751) caps intra-EEA interchange on consumer cards:
- Debit: 0.2% maximum.
- Credit: 0.3% maximum.
- Commercial cards: uncapped, often 1.5 to 2.5%.
- Cards issued outside the EEA: uncapped, often 1.5 to 2%.
CB applies a specific schedule (often 0.23% + €0.08 for debit). It is this cap that brought the average consumer-card MDR in France down from more than 2% (2010) to 0.7–1.2% (2025).
Worked example
A €100 transaction on a French Visa debit card co-badged with CB, routed over CB, at a French merchant:
- CB interchange: ~€0.30 (0.23% + €0.08).
- CB scheme fees: ~€0.03.
- Stripe acquirer fee (blended): ~€0.77.
- Total MDR: ~€1.10, i.e. 1.1%.
Routed over Visa, interchange would drop to €0.20 for an MDR of about €1.05 — a small gap on this card, but one that adds up over annual volumes.
Commercial cards: a special case
Business/corporate cards are not capped by the IFR (typical interchange 1.3 to 2%). Consequences: the merchant pays more when a payer uses a corporate card, and many merchants surcharge these cards (legal unless prohibited nationally — in France, banned on consumer cards, allowed on commercial and non-EEA cards).
Why interchange exists
Interchange is not a racket: it funds the issuer's economics — free or cheap card issuance, loyalty programmes (cashback, miles), fraud risk-taking, the cost of ACS and 3DS2. Without it, cards would be paid for by the cardholder (the Amex model, with a high annual fee).
What the MDR does not cover
- Chargeback fees (€1 to €25 per case), monthly fees, gateway fees.
- Currency conversion (DCC), billed separately.
- Setup / installation fees for terminals.
- Rental or purchase of physical terminals.
- 3DS fees (€0.01 to €0.05 per transaction at some PSPs).
In the PSD2 ecosystem
The IFR (interchange cap) and PSD2 (creation of the TPPs) are the two legs of European payments regulation in the 2010s. The PSR (2023) does not touch the IFR cap but strengthens MDR transparency on the merchant side, requiring disclosure of the detailed breakdown.
Concrete examples
- Stripe France: 1.4% + €0.25 on EEA consumer cards, 2.9% + €0.25 outside the EEA, +1% currency conversion — a blended model.
- Adyen: interchange++ by default on enterprise accounts, with a fixed acquirer fee (6 to 12 cents); MDR below 1% on EEA cards for very large volumes.
- Worldline terminals: 0.5 to 0.8% on EEA consumer cards for enterprise accounts, 1.2 to 1.8% for small merchants (plus €15 to €30/month for the terminal).
- Amex: merchant MDR of 1.8 to 3.5% in France, hence many refusals, offset by a premium cardholder base.
- Surcharging: some players (low-cost airlines, travel) surcharge commercial or non-EEA cards.
- Wero / EPI (A2A): an account-to-account payment can cost €0.01 to €0.1 per unit, far less than a card MDR — the central argument for competing with the card networks.
- Outlook: the EU is studying an IFR revision for 2027 (a possible cut to debit caps, inclusion of commercial cards), strongly contested by the card industry.