Payment Fees and Interchange Explained
Every electronic payment involves several organisations doing work — authenticating the payer, moving the instruction, carrying risk and settling the money — and each layer of that work has a cost. Payment fees are how those costs are recovered, and understanding the components helps you compare providers and pricing models on a like-for-like basis.
The fee structure differs between card payments and bank-based payments such as debit orders, EFT and PayShap, so it is worth looking at each separately.
What fees make up a card transaction?
When a customer pays you by card, the total fee you pay (often called the merchant service fee or merchant discount rate) is typically built from:
- Interchange — a fee paid by the acquiring side to the card issuer for each transaction. In South Africa, interchange rates are determined through a process overseen by the South African Reserve Bank, and they vary by card type and how the transaction is processed (for example card-present versus card-not-present).
- Card scheme fees — charged by networks such as Visa and Mastercard for using their rails and rules.
- Acquiring and processing fees — the margin of the acquiring bank and payment provider for authorisation, clearing, settlement, risk management and support.
Because interchange differs by card type, a premium credit card usually costs a merchant more to accept than a standard debit card, even for the same purchase amount.
What fees apply to debit orders and bank transfers?
Bank rails have no interchange in the card sense, but there are still costs at each step. Typical fee components include:
- Transaction or collection fees — a fee per debit order submitted, or per EFT or PayShap payment processed.
- Unpaid or failed collection fees — returned debit orders often carry a fee, which is one reason reducing unpaids matters. See Unpaids, returns and resubmissions.
- Mandate authentication fees — DebiCheck involves an authentication step through the payer's bank, which has an associated cost.
- Dispute-related fees — handling disputes and reversals carries operational cost.
- Platform or monthly fees — some providers charge for access, reporting or minimum volumes.
Actual amounts depend on your provider, rails and volumes. For what applies to your Kwik account, refer to your agreement and the published pricing.
How do pricing models differ?
Providers package these components in different ways:
| Pricing model | How it works | Trade-off |
|---|---|---|
| Blended rate | One flat percentage or fee across all transactions | Simple and predictable, but averages cheap and expensive transactions together |
| Interchange-plus (unblended) | Actual interchange and scheme fees passed through, plus a fixed margin | Transparent and often cheaper at volume, but statements are more complex |
| Per-transaction fee | A fixed rand amount per payment, common for debit orders and EFT | Very predictable; percentage-based costs do not apply |
| Tiered pricing | Rates that step down as volume grows | Rewards scale, but tiers need checking against your real mix |
When comparing quotes, compare the full picture: the headline rate, unpaid and dispute fees, monthly fees, and settlement timing all affect the true cost of collecting a rand.
Why do fees vary between payment methods?
Cost tracks risk and infrastructure. Card-not-present payments carry more fraud and chargeback risk than card-present payments, and so tend to cost more. Debit order collections are inexpensive per transaction but carry unpaid and dispute risk, which DebiCheck's authenticated mandates were introduced to reduce. Real-time rails like PayShap involve instant, irrevocable clearing infrastructure. Choosing methods is therefore partly a pricing decision — see How to choose payment methods.
Related topics
Cut-Off Times and Value Dates
Learn how bank cut-off times, banking days, non-banking days and value dates determine when a payment is processed and when funds actually reflect.
National Payment System
An overview of the national payment system, the role of the SARB, PASA and BankservAfrica, and the clearing streams that move money in South Africa.