What are Scheme Fees?

What is IC++?

IC++ is a standard industry pricing framework that acquirers use to charge for payment processing services to merchants. It consists of the following fees:

IC stands for Interchange: This is a fee the acquirer (Secure Trading Financial Services (‘STFS’)) pays to the cardholder’s issuing bank (i.e. the bank that issued the card used to make the payment). The interchange rates are set by the Visa and MasterCard Schemes. STFS does not retain any part of the interchange fees as the full amount is passed through to the cardholder’s issuing bank.

First “+” stands for Card Scheme Fees: These are the fees STFS pay to the Visa and MasterCard Schemes. Visa and MasterCard set these fees at an industry wide level. As with Interchange STFS does not retain any part of scheme fees as the full amount is passed through to Visa and MasterCard. This Card Scheme Fee is the element which is changing and being highlighted in the letter sent to STFS merchants.

Second “+” stands for the acquirer fee: This is the fee STFS charges to cover its costs and margin for providing the merchant acquiring services.  This fee is agreed between STFS and merchants and is detailed in the Pricing Schedule STFS entered with the merchant.

Is IC++ different from my Merchant Service Charge?

IC++ is the same as the Merchant Service Charge, different terminology referring to the same fees.  Any fees and charges which a merchant must pay are set out in the STFS Merchant Acquiring Service T&Cs and accompanying Pricing Schedule.

What is changing in 2017 Scheme Fees?

Both Visa and MasterCard are changing some of the fees they charge, and in some cases adding new fees.  The impact of the changes is reflected in the table provided in the letter being sent to merchants.

Are these changes mandatory? Why are Scheme Fees changing in 2017?

Scheme Fees are set by the Visa and MasterCard schemes and are reviewed periodically by the schemes, typically every year.

When are the changes taking place?

As per the communication being sent to merchants, the changes are taking effect from 1st January 2017.

Why have we not received notice about these Scheme Fee changes before?

STFS is not obliged to provide notice about such industry wide changes to scheme fees that STFS may pass directly through to merchants. However, STFS would like to provide greater transparency and are therefore communicating to merchants about this change.

What is the impact on a merchant’s bill?

The impact will vary depending on each merchant’s volume profile, for example the mix of sales a merchant receives from domestic* versus international** transactions and e-Commerce versus MOTO transactions.  Further to this, as Scheme Fees make up only a part of a merchant’s overall bill, the entire impact to each merchant will also depend on the level of each merchant’s “other fees”, for example wire fees and chargeback fees.  STFS’s customer service team/sales team can provide a merchant with a guide as to the amount of impact a merchant may experience. Please note that providing such is a guide and indicative only.

* Domestic = sales to cardholders with cards issued by banks in the same country as the merchant.
**International = sales to cardholders with cards issued by banks in countries other than that of the merchant i.e. intra-Europe and interregional transactions.

Is STFS the only acquirer changing the Scheme Fees?

No, these pricing changes are industry wide with all acquirers within the Visa and MasterCard Europe regions being affected and hence changing their scheme “+” charges within their IC++ merchant pricing framework.

Q9. Will the Scheme Fees change again?   

A9. The card schemes review their fees regularly and typically change their fees every 12-18 months, but it can be more or less often than that. Card Scheme pricing changes are a commercial decision for the Schemes. STFS has no control over the timing or magnitude of any such changes.

Q10. Will there be other changes to my IC++ fees, apart from Scheme Fees (e.g. Interchange, Merchant Service Charge, etc.)?

A10. IC++ comprises Interchange, Scheme Fees and the Acquirer Fee.

The Acquiring Fee will remain as set out in the Pricing Schedule agreed between a merchant and STFS.

Interchange is an element of IC++ which is set by the Card Schemes with consumer interchange within the European Union being regulated by the European Commission (i.e. the Interchange Fee Regulation). Therefore, for there to be a change in Interchange, either the Card Schemes would have to impose a change, or the European Commission impose regulation, to change the interchange fee rates.

In May 2015, the European Commission regulated that consumer interchange fees were to be capped at 0.2% for debit card transactions and 0.3% for credit card transactions across all EU markets.  The Schemes have already changed their consumer interchange fees rates to comply with this.

Q11. Will we receive a new contract or Pricing Schedule?   

A11. No, as this is an industry wide change. The change to your scheme fee “+” is permitted under the merchant’s current terms and conditions and Pricing Schedule with STFS.

What is an acquirer?

An acquiring bank, or acquirer, is a financial institution which accepts credit/debit card payment transactions, manages card settlements, mitigates risk and provides merchants with reporting functionality.

Acquiring banks are licensed as members of Visa and MasterCard to provide merchants with an account and therefore allow merchants to accept credit/debit cards.

Secure Trading Financial Services is an acquirer with speed and simplicity at its core. Our paperless application process can approve merchants for boarding in as little as 48 hours.

A Secure Trading Financial Services merchant account enables you to process MasterCard and Visa credit and debit cards, payment methods that are convenient for you and your customers.

Why do I need a merchant account?

If you want to accept payment by credit or debit card, and therefore offer your customers a quick, easy and convenient way of paying for your goods and services, a merchant account is essential.

In this context, a merchant is a company or individual who has agreed a contract with an acquirer to accept credit and debit cards (Visa and MasterCard).

This arrangement provides the merchant with a line of credit. Under the agreement, the acquirer exchanges funds with issuing banks (those who have issued the customers’ payment cards) on behalf of the merchant.

The acquirer pays the merchant its daily payment-card activity net balance (gross sales minus reversals, interchange fees and acquirer fees).

If you want to work with an acquirer built on efficient online processes, with a solid payments pedigree and connections with the best payment processing and cyber security expertise, Secure Trading Financial Services is the partner you’ve been looking for.

Benefits of a merchant account

  • Allows you to accept card payments in a wide range of currencies
  • Provides your customers with a secure online payment option
  • Instant and seamless card payment processing without re-directing your customers away from your website

How do I get a merchant account?

The simplest way of getting a merchant account is to complete the Secure Trading Financial Services online application form. Our unique paperless process could have you approved for your account in as little as 48 hours!

You will also need a payment gateway, supplied by a payment services provider (PSP), which securely handles the processing between your shopping cart, the credit and debit card companies (Visa and MasterCard) and ultimately your merchant account, which receives your funds.

Our sister company, Secure Trading, provides the most secure and reliable payment gateway available. You can automatically be provided with a Secure Trading payment gateway when you complete our application form.

What is a payment gateway?

A payment gateway is a link between an ecommerce website and an online payment processor, or payment services provider (PSP). When the merchant’s customer makes an online purchase, the information from the website is sent through the payment gateway to obtain an authorisation for a payment card transaction to be completed.

Payment gateways take the place of a card-swipe terminal machine in a physical shop. They capture the customer’s card data from the merchant’s website or internet browser and securely send it to the processor for payment processing.

There are multiple methods for integrating a payment gateway to an ecommerce website. Our sister company, Secure Trading, offers a variety of integration options and a fantastic 100% uptime record. When you complete your Secure Trading Financial Services application form you can ask to be provided with a Secure Trading payment gateway. We also partner with other payment gateways if you are already with a different provider.

What is a shopping cart?

A shopping cart is a software program that allows customers to choose multiple products, adds up the items’ total costs, calculate taxes or shipping costs if applicable, and provides a final amount to the customer.

A payment gateway collects the purchaser’s information such as name, address, credit card number, and expiration date. The payment gateway securely sends this information and verifies that the purchaser has enough funds in their account at the time to pay for the products.

Both a shopping cart and a payment gateway are essential elements of an ecommerce website.

What is the step-by-step process for a card payment?

1. Consumer purchases products from a merchant through any sales channel
2. Merchant submits the order/transaction via their payment service (terminal, gateway, software, telephone)
3. Payment service provider (PSP) securely forwards the authorisation request to the card issuing bank, to verify the consumer’s credit card account and the availability of funds
4. The authorisation (or decline) is sent via the payment system to the merchant
5. Upon approval, the merchant settles the batch and the system sends the settlements request to the acquirer
6. Acquirer deposits transaction funds into the merchant’s account

What is an authorisation?

An authorisation is a validation that the card is valid for an approval of the sale amount. The issuing bank confirms that the cardholder has funds available to make the purchase.

How do I receive the funds from a sale?

The sale transaction is sent to the acquirer (the merchant account provider). The acquirer sends it to the card issuing bank for authorisation and settlement. If the transaction is authorised, the merchant submits the transaction to the acquirer to capture the funds of the cardholder and settlement the amount. The acquirer then deposits the funds to your bank account.

What is a virtual terminal?

A virtual terminal is a browser-based application to process payments through the internet. The feature allows merchants to accept debit and credit cards from their customers over the phone, fax or mail (MOTO transactions). Orders are placed manually entering the card information into the virtual terminal. Merchants must initiate AVS checks and request their customers for the CVV, CCV, CCV2 values.