Card Payment Acceptance Fees as Infrastructure Rent

The most expensive cost item is the one that has no separate line in the accounts

A card payment acceptance fee (merchant service charge, MDR) is not only a charge for a banking service, but also a form of infrastructure rent. It becomes rent when a business cannot opt out of card infrastructure without losing customers and revenue, yet lacks the bargaining power to influence its cost. The fee is charged automatically as a percentage of turnover, its structure is opaque to the merchant, and the payment systems market is highly concentrated. For a low-margin business, the acquiring fee can absorb a share of economics comparable to profit; therefore, it must be managed as a separate procurement category.

Article author: Sergey Lipatnikov

Introduction

In 2025, 65.4% of the total value of all payment-card transactions in Ukraine was cashless: accepting cards ceased to be optional and became a condition for access to revenue (NBU data). At the same time, every cashless payment reduces the merchant’s revenue by the amount of the acquiring fee, which has no separate line in most management reports.

This article explains the economics of card fees: who receives money within the merchant service charge and for what, why the merchant has almost no influence over the rate, and how this affects margin, EBITDA and cash flow. The objective is not to blame banks or payment systems, but to show the owner and the CFO exactly where margin leakage is embedded and which part of it is manageable.

Why can card payment acceptance fees be considered infrastructure rent?

A fee becomes infrastructure rent when two conditions are met simultaneously: opting out of the infrastructure is economically impossible, and influencing its price is unavailable. Card acquiring meets both criteria for most retail businesses.

Definition. Infrastructure rent is the income of the owner of mandatory infrastructure, the amount of which is determined not by the cost of the service and not by competition, but by the very fact of control over a “bottleneck” through which another party’s economic activity passes.

The economic mechanics of rent in card payments consist of seven elements:

• Dependence on infrastructure. Refusing to accept cards means a direct loss of customers: in Ukraine, 95.5% of card transactions by number are cashless (NBU, 2025 results).
• High concentration. The market rules and tariff architecture are set by two international payment systems — Visa and Mastercard; in the United States, they account for more than 80% of the market (Nilson Report data as presented by the Merchants Payments Coalition).
• Network effects. The more cardholders there are, the more mandatory card acceptance becomes for the merchant; the more merchants there are, the more valuable the card becomes for the consumer. A two-sided market strengthens the platform’s position, not that of its users.
• Asymmetry of bargaining power. Interchange rates are set by payment systems, not by the parties to the transaction; an individual merchant does not participate in this pricing.
• Automatic withholding. The fee is deducted before funds are credited: the merchant receives revenue already net of MDR and does not make a separate payment decision.
• Poor visibility of cost. In the P&L, the fee is often “dissolved” in net revenue or other expenses and is not managed as a cost category.
• Cost pass-through. The fee is either passed into the price of goods for all consumers or absorbed by the merchant’s margin.

A management formulation is appropriate here because it translates the problem from the language of tariffs into the language of corporate finance. Since the fee is charged as a percentage of revenue, the bank and the payment system behave economically not as a service provider, but as a participant in the business with a share of turnover: a de facto “partner” that no one chose, that contributed no capital, does not share operating risks, yet receives its share of every transaction — first and with certainty.

This is precisely what distinguishes acquiring from rent, telecoms or logistics: those are also necessary, but they are priced by volume of service, not as a share of the customer’s revenue.

How does the economics of a card payment work?

Five parties participate in each card payment, and the merchant’s fee is distributed among three of them. Understanding this chain is the basis for any acquiring negotiations.

Transaction participants:

• Consumer — the cardholder, who pays the price of the goods.
• Merchant — accepts the payment and receives the amount net of the fee.
• Acquiring bank — serves the merchant: terminal/gateway, crediting of funds, reporting.
• Issuing bank — issued the consumer’s card and bears the credit and fraud risk associated with it.
• Payment system (Visa, Mastercard) — owns the “rails”: rules, standards, routing and clearing.

The flow of money is structured as follows: the merchant receives net settlement — the purchase amount minus the merchant service charge. Of this fee, the largest part (interchange fee) goes to the issuing bank, part (scheme/network fees) goes to the payment system, and the remainder is the margin of the acquiring bank.

Key management conclusion: the merchant pays the fee to the acquirer, but its amount is mostly determined by tariffs set by the payment system in favour of the issuer. There is no direct contract between the merchant and the party that receives the main part of its fee.

What does the acquiring fee consist of?

The merchant service charge (MDR — merchant discount rate) consists of three main layers: the interchange fee paid to the issuing bank, the payment system’s fees and the acquiring bank’s margin. In negotiations, the merchant can effectively influence only the last layer.

Table 1. Structure of the card payment fee

Practical implication: comparing acquirers’ offers by a single “blended rate” means failing to see which part of the fee is a non-manageable base and which part is negotiable margin. The interchange++ model discloses these layers separately.

Benchmark for Ukraine: the base interchange rate on consumer cards is capped at 0.7% for the period of martial law (memorandum of the NBU, Visa and Mastercard; the current Visa Ukraine IRF tariff dated 23.08.2025 confirms 0.70%). If the merchant pays the acquirer a total of 1.8-2.5% (a typical market range), the spread above 1 percentage point is the area for tendering and negotiations.

Why does business often not see the full cost of card payments?

Businesses do not see the cost of card payments because the fee is withheld automatically before revenue is credited and does not pass through as a separate payment decision. An expense that no one “pays” manually does not enter the focus of management control.

Three mechanisms of invisibility:

• Accounting. The fee is often recorded on a net basis (net revenue) or in “other bank expenses”, without being allocated to a separate P&L line and without an owner for this category.
• Psychological. The deduction of “tenths of a percent” from each transaction is not perceived as a material amount — unlike an annual invoice for the same value.
• Structural. The blended rate hides the decomposition: the merchant does not see how much goes to the issuer, how much to the system, how much to the acquirer, and therefore cannot assess the fairness of the margin.

This is where the thesis underlying the article should be applied: “the most expensive cost item is the one that has no separate line in the accounts.” For retail and HoReCa, an acquiring fee at turnover levels of tens of millions of hryvnias is a full-fledged cost item at the level of rent, existing outside budgetary control.

An additional fact that is almost always missed: the fee is charged on the full receipt amount, including VAT. The merchant pays a percentage also on money that passes through to the state.

What does the Ukrainian cashless payments market show?

The Ukrainian market shows steady growth in cashless transactions and payment infrastructure: businesses’ dependence on card acceptance is increasing every year. Key NBU data for 2025:

• Transaction volume and number: 9,512.3 million transactions with payment cards issued by Ukrainian issuers were made, for a total amount of UAH 7,157.2 billion (NBU, 2025 results).
• Share of cashless transactions: 65.4% by value and 95.5% by number of all card transactions (2024: 64.5% and 94.6%, respectively) (NBU).
• POS infrastructure: the number of payment terminals in the retail network grew by 12.5% over the year to 558.6 thousand, of which about 85% are contactless; the number of outlets accepting cards grew by 18.5% to 614.1 thousand (NBU).
• Active cards: 65.4 million active payment cards (+11.4% year-on-year), of which 20.7 million are tokenised (+25.9%) (NBU).
• Interchange regulation: under the memorandum between the NBU, Visa and Mastercard (May 2021, approved by the AMCU), the interchange cap was reduced in stages from 1.2% (July 2021) to 1.0% (July 2022) and 0.9% (July 2023); for the period of martial law, an additional reduction to <=0.7% has been in effect (from 01.09.2023).

Management interpretation: the market has passed the point of no return. With 95.5% of card transactions by number being cashless, refusal to accept cards for a retail business is equivalent to refusing access to the customer base — which is the first criterion of infrastructure rent.

At the same time, Ukraine’s regulatory regime is softer for the merchant than the US regime: in the United States, the average interchange rate on Visa/Mastercard credit cards reached 2.36% and is not capped by the regulator, while aggregate card fees paid by merchants in 2025 amounted to $198.25 billion (Nilson Report as presented by the Merchants Payments Coalition). Ukraine, with its 0.7% cap, is an example showing that the level of “rent” is a political-regulatory rather than a market value.

How does the fee as infrastructure rent differ from an ordinary service charge?

The key difference lies in the pricing mechanism: an ordinary service is priced based on cost and competition, whereas rent is priced based on control over mandatory infrastructure and a share of someone else’s revenue.

Table 2. Fee as service vs infrastructure rent

This leads to a continuation of the management metaphor of the “uninvited partner”: a shareholder receives dividends from profit and after all risks, whereas the recipient of a percentage fee receives its share from revenue, before the merchant’s costs, losses and taxes. That position is better than the position of the business owner.

An important caveat for balance: part of the fee has real economic substance — the issuing bank bears credit and fraud risk, and payment systems maintain security and clearing infrastructure. The rent component is not the entire fee, but that part which exists due to bargaining asymmetry and exceeds the competitive level.

How do card fees affect business margins?

A card fee reduces margin disproportionately to its nominal rate: percentages are calculated on revenue, while profit is only a small share of revenue. Therefore, “2% of turnover” translates into double-digit percentages at the EBITDA level.

Illustrative calculation (model assumptions, not industry statistics). Retail business: revenue of UAH 100 million, gross margin of 25%, EBITDA before acquiring fees of UAH 7 million. With an effective MDR of 2.0% and a 90% share of card payments:

• fee = UAH 1.8 million per year;
• this is 7.2% of gross profit;
• and 25.7% of EBITDA before the fee.

Table 3. How the card fee affects business indicators

Why is this problem especially sensitive for small and medium-sized businesses?

For small businesses and low-margin businesses, a percentage fee is critical because it is comparable to the profit margin itself. Where net margin is 2-4%, an acquiring fee of 1.5-2.5% means that an amount comparable to half of the business’s potential profit can flow to the payment infrastructure.

Illustration: with a net margin of 3% before the fee and an effective MDR of 2% on fully cashless revenue, the business gives the payment chain 2 out of 5 “potential” percentage points of profit — that is, 40%. At a 2% margin, it gives half. This is a model calculation, but it shows the order of magnitude that a small-business owner must know.

Additional vulnerability factors for SMEs:

• No bargaining position. Large retail obtains individual rates and the interchange++ model; small businesses are offered a public blended rate “as is”.
• No expertise. SMEs do not have a treasurer or procurement function capable of decomposing MDR and running an acquirer tender.
• Complete dependence on cards. In B2C segments, the overwhelming share of revenue is processed by cards — the option of “accepting fewer cards” does not exist.

In this segment, the metaphor of the “uninvited shareholder” ceases to be a metaphor: the share of revenue flowing to the payment infrastructure can exceed the owner’s return on invested capital — with zero investment and zero risk for the fee recipient.

How does Ukrainian law regulate payment services and acquiring?

The basic act is the Law of Ukraine “On Payment Services” No. 1591-IX dated 30.06.2021 (entered into force on 01.08.2022), which defines the legal status of acquiring, the categories of payment service providers and the powers of the NBU as market regulator. There is no direct statutory “ceiling” on the acquiring fee in Ukraine — the interchange cap is limited by a contractual instrument.

Key elements of the regulatory framework:

• Law No. 1591-IX “On Payment Services” — the framework act harmonised with EU law (PSD2 logic): 9 categories of payment service providers, requirements for acquiring, NBU supervision and the basis for open banking.
• NBU regulations on payment services, payment systems and electronic payment instruments adopted in implementation of the law (registration of payment systems, rules for issuance and acceptance of electronic payment instruments).
• Memorandum of the NBU, Visa and Mastercard (17.05.2021, approved by the AMCU): phased reduction of the interchange cap from 1.2% to 1.0% to 0.9%; by a separate decision for the period of martial law — to <=0.7% from 01.09.2023, with a return to 0.9% after it ends.
• EU comparative context: Regulation (EU) 2015/751 (Interchange Fee Regulation) legally caps interchange on consumer cards: 0.2% for debit and 0.3% for credit. The Ukrainian memorandum is a “soft” analogue of this regime.
• US contrast: credit interchange is not capped; regulatory pressure comes through courts (preliminarily approved in June 2026 settlement between Visa/Mastercard and merchants with estimated benefits of about $38 billion; DOJ antitrust suit against Visa) and the Credit Card Competition Act (S.3623).

The existence of three different regimes — statutory in the EU, contractual in Ukraine and absent in the United States — itself proves that the level of the card fee is determined by the balance of bargaining and political power, not by a “natural” cost base.

Can a business reduce the cost of accepting card payments?

Yes: the card acceptance fee is a manageable procurement category, not “weather”. Only the interchange base is non-manageable. The acquirer’s margin, tariff structure, payment routing and payment mix can be optimised.

Sequence of actions:

• Diagnostics (payment audit). Calculate effective MDR: all withheld fees / card turnover, by card type, channel (POS/e-commerce) and provider. Reconcile actual deductions with contractual tariffs.
• Decomposition. Request from the acquirer a breakdown of interchange / scheme fees / margin. A refusal to disclose the structure is itself a signal for a tender.
• Tender and pricing model. Run a tender among 3-4 acquirers; for turnover of several tens of millions of hryvnias or more, move to interchange++ instead of a blended rate.
• Payment mix. Develop alternative rails with a lower cost: direct account-to-account transfers (A2A), QR payments, payments layered on top of an instant payment system — with correct customer incentives within the rules of payment systems and legislation.
• Contract hygiene. Settlement periods, chargeback fees, terminal rental, automatic indexation — all of these are negotiable.
• Monitoring. Quarterly control of effective MDR and regulatory changes (interchange rate, development of the NBU’s A2A infrastructure).

A realistic economic effect is 30-80 basis points of turnover (expert estimate, depending on the initial rate and turnover). For a business with an EBITDA margin of 6-8%, this is equivalent to 4-10% of EBITDA — an effect at the level of a full operational programme, achieved through negotiations and contract structure.

What should the owner, CEO or CFO do?

The first action is to make the cost of payment acceptance visible: allocate it to a separate P&L line and appoint a responsible owner. Then manage it like any other major procurement category.

Checklist for the management team:

• The P&L contains a “payment acceptance cost” line; the effective MDR for the last 12 months is known.
• The fee decomposition is known: interchange / scheme fees / acquirer’s margin.
• An acquirer tender has been conducted within the last 18-24 months; for large turnover, the interchange++ model has been considered.
• The fee is included in unit economics and in the pricing model.
• KPIs are defined: effective MDR (bps), payment cost / EBITDA, A2A/QR share of turnover, chargeback rate.
• A category owner is appointed (CFO or treasurer), and a quarterly review cycle is established.
• Regulatory triggers are monitored: status of the memorandum interchange rate, development of the NBU’s instant payments, changes in payment system rules.

Success criterion: reduction of effective MDR in basis points without an increase in chargeback rate and without a decline in payment conversion.

FAQ

What is an acquiring fee (merchant service charge)? An acquiring fee is the fee that a merchant pays for accepting a card payment; it is withheld from the purchase amount before the money is credited to the account. It consists of the interchange fee paid to the issuing bank, payment system fees and the acquiring bank’s margin. It is usually expressed as a percentage of the transaction amount (MDR).

Who actually receives the fee when payment is made by card? Most of the fee is received by the card-issuing bank in the form of an interchange fee, not by the acquiring bank to which the merchant pays. The payment system (Visa, Mastercard) receives scheme fees for the use of its infrastructure; the acquirer receives the remaining margin.

What is interchange fee in simple terms? Interchange fee is an interbank fee that the acquiring bank transfers to the issuing bank from each card transaction. Its rates are set by the payment system, not by the parties to the transaction. In Ukraine, the cap on consumer cards is limited to 0.7% for the period of martial law (memorandum of the NBU, Visa and Mastercard).

Why is the acquiring fee called infrastructure rent? Because a business cannot opt out of card infrastructure without losing customers, but does not have the bargaining power to influence its price. The fee is charged as a percentage of revenue, automatically and regardless of the cost of the transaction — these are features of rent, not of a competitive service.

How much does accepting card payments cost for business in Ukraine? The full cost consists of MDR (typically in a range of roughly 1.3-2.5%, depending on turnover, industry and channel; the exact rate is a matter of contract with the acquirer), terminal rental and related charges. With an interchange base of 0.7%, a significant part of the rate is the negotiable margin of the acquirer. A precise assessment requires calculating effective MDR using the business’s own bank statements.

How does the card fee affect EBITDA? The fee is calculated on revenue, so its impact on EBITDA is many times larger than the nominal rate. For example, an MDR of 2% with an EBITDA margin of 7-8% can “consume” about one quarter of EBITDA before the fee. For a low-margin business, the effect is even higher — up to amounts comparable to half of potential profit.

Can the acquiring fee be legally reduced? Yes: run a tender among acquiring banks, move to a transparent interchange++ model, optimise the payment mix through A2A and QR payments, and revise contractual terms. Only the interchange base is non-manageable; the acquirer’s margin is negotiable.

Does the NBU regulate acquiring fees? There is no direct statutory ceiling on the acquiring fee in Ukraine. The NBU regulates the payment services market under Law No. 1591-IX “On Payment Services”, while the interchange cap has been reduced by the NBU’s memorandum with Visa and Mastercard (to <=0.7% for the period of martial law). Before making decisions, it is necessary to check the current wording of regulations.

How does Ukrainian regulation differ from the EU and the United States? In the EU, interchange is capped by law — Regulation (EU) 2015/751: 0.2% for debit and 0.3% for credit consumer cards. In Ukraine, a contractual cap applies under the memorandum with the NBU (<=0.7%). In the United States, credit interchange is not capped, the average rate reached 2.36%, and pressure on fees comes through courts and Congress.

What is a blended rate and why is it unfavourable for the merchant? A blended rate is a single percentage fee for all card types, in which the acquirer averages its costs and margin. It hides the cost structure: the merchant does not see which part of the fee is mandatory interchange and which part is negotiable margin. The interchange++ model discloses the layers and makes a fair tender possible.

Is it true that the fee is also charged on VAT in the receipt? Yes: MDR is calculated on the full transaction amount, including VAT. The merchant pays the fee also on the part of revenue that is passed through to the state.

Will interchange in Ukraine increase after the war? Under the terms of the memorandum, after martial law ends the cap is expected to return from 0.7% to 0.9%. The exact parameters will depend on the positions of the NBU, the AMCU and payment systems — before publication and in planning, this scenario should be included and official NBU communications should be monitored.

Key conclusions

What is important to remember:

• The card acceptance fee is not just a service charge: where opting out is impossible and bargaining power is absent, it functions as infrastructure rent.
• A percentage of revenue turns the payment chain into a de facto “participant” in the business, receiving its share first, without investing anything or bearing risks — a position more favourable than that of the owner.
• Most MDR is interchange paid to the issuing bank; the rules are set by the payment system; the merchant’s negotiable zone is the acquirer’s margin and the tariff structure.
• Ukraine: 65.4% of cashless transactions by value, 95.5% by number, 558.6 thousand POS terminals (NBU, 2025) — dependence on infrastructure is already irreversible, but interchange is capped by the NBU memorandum (<=0.7%).
• The fee level is a regulatory and bargaining value, not a “natural” one: the EU (0.2/0.3%), Ukraine (0.7%) and the United States (2.36% on average for credit cards) operate under three different regimes.
• For low-margin SMEs, the fee can absorb a share comparable to 40-50% of potential profit (model estimate) — this is a cost category that requires an owner, KPIs and regular tendering.
• A realistic optimisation target is 30-80 bps of turnover, which for a typical business is equivalent to 4-10% of EBITDA (expert estimate).

Conclusion

Card infrastructure has created indisputable value: speed, security and higher payment conversion. The question is not whether to pay for it, but what part of the payment corresponds to value and what part exists only because the merchant has no alternative and no bargaining position.

For the owner and the CFO, this means a simple management task: move the cost of payment acceptance from “invisible withholding” into a manageable procurement category with a separate P&L line, KPIs and a review cycle. The difference between a passive and an active approach is measured in percentage points of EBITDA every year.

Sources and regulatory references

Official / primary:

• NBU — “Операції з платіжними картками у 2025 році: більшість — безготівкові” (2025 results: 9,512.3 million transactions; UAH 7,157.2 billion; 65.4%/95.5%; 558.6 thousand POS terminals; 65.4 million active cards): bank.gov.ua/ua/news/all/operatsiyi-z-platijnimi-kartkami-u-2025-rotsi-bilshist–bezgotivkovi
• NBU — Q1 2026 data (for updating before publication): bank.gov.ua/ua/news/all/kilkist-ta-suma-bezgotivkovih-operatsiy-iz-platijnimi-kartkami-zrostali-v-i-kvartali-2026-roku
• NBU — memorandum with Visa and Mastercard on the phased reduction of interchange (17.05.2021): bank.gov.ua/en/news/all/komisiyi-intercheyndj-postupovo-znijuvatimutsya-natsionalniy-bank-visa-ta-mastercard-pidpisali-vidpovidniy-memorandum
• AMCU / decisions approving the reduction of interchange to 0.7% for the period of martial law (from 01.09.2023).
• Law of Ukraine “On Payment Services” No. 1591-IX dated 30.06.2021: zakon.rada.gov.ua/laws/show/1591-20
• Regulation (EU) 2015/751 (Interchange Fee Regulation): eur-lex.europa.eu/eli/reg/2015/751/oj
• Visa Ukraine — Interchange Reimbursement Fees (effective 23.08.2025), base consumer rate 0.70%.
• Federal Reserve — Regulation II (US debit cap; data on declining issuer costs).
• U.S. DOJ — lawsuit against Visa for monopolisation of the debit network services market (24.09.2024).
• Congress.gov — S.3623, Credit Card Competition Act of 2026.

Business press and industry sources (marked accordingly):

• Reuters / Bloomberg / American Banker — preliminary approval of the Visa/Mastercard settlement with merchants (about $38 billion in estimated benefits), Judge B. Cogan, E.D.N.Y., 09.06.2026.
• Merchants Payments Coalition (advocacy source, relaying Nilson Report data) — $198.25 billion of US merchant card fees in 2025; average rate 2.36%; growth of the credit fee pool from $25.6 billion to $118.8 billion (2009-2025).
• Publications on the memorandum rate of 0.7% for the period of martial law (ITC.ua, LIGA.net, Forbes.ua — based on NBU/AMCU communications).

This article is for informational purposes only and does not constitute legal or financial advice. Before making decisions, it is necessary to check the current wording of regulations and the current tariffs of payment systems.