Lesson 5 · Practitioner · Both · 13 min
MDR, Interchange & Scheme Rules Overview
Break down merchant discount rate into interchange, scheme fees, and acquirer margin — and treat scheme rulebooks as product constraints.
Objectives
- ▸Decompose MDR into its economic parts
- ▸Explain interchange direction and why it exists
- ▸List scheme-rule themes that affect product UX
- ▸Note India-specific MDR policy sensitivity for PMs
Merchant Discount Rate is what the merchant pays on accepting cards (or blended payment fees). Roughly: Interchange (to issuer) + Scheme/network fees + Acquirer/PSP margin + extras (PCI, gateway, forex). Pricing can be interchange++ (transparent) or blended (simpler, less clear).
- Credit usually costs merchants more than debit
- CN P vs CP, MCC, and consumer vs commercial affect rates
- Regulated caps may apply on some debit/UPI-adjacent contexts — verify current rules
Key terms
MDRInterchangeScheme feeInterchange++Blended pricingOperating regulationsStored credentialMCC