Cross-border payments are essential for global commerce, yet costs remain opaque for many merchants. Understanding the cost structure helps merchants manage expenses while improving payment efficiency.
To help address this challenge, Antom, a payment and digital service provider under Ant International (Ant Group), offers the following data-driven insights to help merchants demystify complex fee models, supporting smarter decision-making.
Understanding cost models and fee structures
Q1: How are costs calculated for cross-border card payments?
A cross-border card payment travels through several institutions, and each step adds a cost. What looks like a simple purchase is actually a chain of financial handoffs. The merchant ultimately pays for all of these layers combined.
The first cost comes from the issuing bank, which charges an interchange fee. This fee compensates the bank for liquidity, fraud risk, and network participation. It is usually the largest component, often making up more than one-third of the total cost.
Next, the transaction passes through an international card network such as Visa or Mastercard. These networks charge assessment, cross-border, and clearing fees to move messages and settle funds. While smaller than interchange, these fees remain meaningful for high-volume merchants.
The payment then reaches the acquirer or processor, who handles authorization, settlement, and merchant support. Processing and service fees cover infrastructure, compliance, reconciliation, and operational risk. These fees typically form another important share of the total cost.
If the transaction and settlement currencies differ, a conversion fee is charged. This cost may come from the issuer, the card scheme, or a third-party provider. The merchant often bears this fee indirectly through blended pricing.
Finally, fraud detection, risk scoring, and security monitoring also carry operational costs. These functions protect both the merchant and the consumer. Even if not presented as a separate line item, they are built into the overall rate.
Taken together, a merchant’s true cost is the sum of interchange, network fees, acquiring fees, currency conversion, and risk and security operations. A change in any single layer affects the final cost paid by the merchant.
Q2: Why do card payment costs fluctuate, even for similar transactions?
Card payment costs fluctuate because the cross-border fee structure depends on multiple external variables. Each variable, country, card type, scenario, or regulation, can shift independently. As a result, merchants often experience noticeable and unpredictable cost variations.
The first driver is regional interchange policy. Issuers in different markets set different interchange levels based on regulation and local competition. For example, the European Union caps consumer debit interchange at 0.2% and credit at 0.3%, while Japan and other markets allow significantly higher rates.
The second driver is the card type. Premium, rewards, and corporate cards usually carry higher interchange fees because they fund cardholder perks and loyalty programs. This means the same transaction amount can produce very different costs.
The payment scenario also matters. Online transactions carry higher fraud and chargeback risk than in-store payments, leading to higher fees. Cross-border online payments then add foreign exchange (FX), regulatory, and compliance layers on top.
The transaction amount contributes as well. Large-ticket payments generate higher absolute costs even if the percentage rate is slightly lower. Meanwhile, high-frequency micro-transactions can accumulate relatively heavy per-transaction and risk management costs.
Macroeconomic and regulatory changes can increase volatility further. For example, after Brexit, the UK was no longer bound by EU interchange caps, and several cross-border interchange categories were repriced upward. This led to sudden cost increases for merchants processing UK-EU card transactions.
As a rule of thumb, key cost ranges are as follows:
- Interchange++ (IC++) fees for issuers are 1.5–3.5%, depending on card type, region, and transaction risk.
- Card network fees (Visa, Mastercard) range from 0.1–0.5%, plus a fixed fee typically between USD 0.01 and 0.03.
- FX fees are 1–3%, though some card types offer fee waivers.
Actual costs vary by region, card network, merchant category, average order value, and risk level.
This matters to merchants because even small changes in one variable, such as card type mix or FX fees, can meaningfully shift the total cost per transaction. For merchants operating across multiple markets, these fluctuations can compound quickly. Without visibility, the same product price may produce different margins across countries.
Antom leverages deep operational experience across markets, card types, and regulatory systems. Its global data models help merchants predict cost variability across regions, card mixes, and currencies. With intelligent routing and pricing optimization, it helps merchants stabilize costs, even in high-volatility markets.
Q3: How does the cost structure of digital wallet payments differ from card payments?
Digital wallet payments follow a much simpler cost structure than card payments. They remove the traditional card-network layer, which shortens the value chain and reduces the number of fee components. This makes wallet payment costs more predictable and easier for merchants to manage.
When a consumer pays with a digital wallet, the wallet provider effectively acts as both the issuer and the account manager. The provider charges a service fee to the merchant to cover account operations, transaction processing, and fraud prevention. This fee becomes the primary cost component in wallet-based transactions.
Clearing and settlement for wallet payments rely on technical service providers or clearing networks. These providers charge technical or channel fees to maintain infrastructure, uptime, and transaction routing. Although smaller than service fees, they remain an essential part of total cost.
If currency conversion is needed, merchants also incur FX transaction costs. These FX charges depend on the currency pair, market volatility, and the wallet provider’s pricing model. While simpler than card-based FX, the fee may still vary across markets.
Overall, wallets reduce cost complexity by removing interchange and card network fees entirely. This often results in 30–50% lower total cost compared with traditional card payments. For merchants operating across multiple regions, this transparency significantly improves cost predictability.
A general reference for the costs involved is as follows:
- Service fees range from 0.5–1.5%, varying based on wallet type, transaction type, and merchant volume.
- Technical and channel fees total 0.1–0.3% for routing, clearing, and system maintenance.
- FX fees fluctuate based on the currency pair, typically with lower volatility than card-based FX. Wallet payments can remove card network fees entirely and reduce total cost by about 30–50%.
For cross-border merchants, wallets offer lower costs, fewer variables, and higher predictability. In a landscape where card payment costs fluctuate widely, wallets provide a more stable alternative. As wallet adoption grows globally, they increasingly complement traditional card payment options.
Q4: Are wallet-based payments always cheaper to process than card payments? How should merchants choose?
Wallet payments are not inherently lower in cost, as their real expense also depends on coverage, regional network strength, and risk control needs. Merchants should evaluate user habits and target markets rather than focusing only on fees.
In markets where e-wallets are highly popular, such as parts of Southeast Asia, wallet payments may offer lower rates and better conversion. But in mature markets like Europe and North America, cards remain dominant, and relying only on wallets can reduce sales.
The right choice should balance cost, user experience, and conversion efficiency. If customers prefer cards, merchants should keep card payments even if fees are higher. And in markets where wallets dominate, prioritizing them will likely bring better results.
Antom provides robust wallet ecosystem advantages, especially in Southeast Asia, enabling merchants to adopt local payment methods easily. Its integrated payment and marketing services help lower costs while improving retention, turning payment selection into a strategic growth lever.
Q5: We often hear that acquiring fees for international card payments use either the IC++ model or blended pricing. What’s the difference?
The key difference lies in transparency and predictability. IC++ breaks the acquiring cost into three parts: interchange, scheme fees, and acquirer margin. This allows merchants to see exactly where each cost comes from.
IC++ offers high transparency and flexibility, making it suitable for merchants who would like to analyze transaction structures and optimize costs. However, fees vary by card type, region, and transaction category, so the total cost can fluctuate.
Blended pricing provides one fixed rate for all transactions. Merchants do not need to understand the underlying rules, making financial planning easier, but they lose visibility into how each fee component changes.
In essence, IC++ highlights true cost transparency, while blended pricing prioritizes simplicity and predictability. Each model fits different merchant needs and operational preferences.
Q6: How should merchants decide which fee model to use?
Merchants with strong finance teams and solid data capabilities usually benefit more from IC++, because its transparency allows them to analyze transaction structures and optimize overall costs. If you can manage fee fluctuations and value granular control, IC++ is a better fit.
For merchants who lack the resources to handle complex fee systems, especially in the early stage of overseas expansion, blended pricing offers simplicity. A fixed, predictable rate helps them focus on growth without dealing with detailed cost breakdowns.
In short, IC++ suits merchants seeking maximum optimization and who can tolerate cost variability, while blended pricing suits merchants who prefer stability and operational simplicity. Different models align with different business stages and risk preferences.
Analyzing cost drivers
Cost optimization starts with understanding what drives fees. Merchant profile, customer behavior, and transaction region interact to affect total expense.
The following insights are provided by Antom to help merchants better anticipate these factors and manage them more effectively.
Q7: How should cross-border merchants evaluate their payment costs? What factors influence efficiency and overall spending?
Cross-border payment cost is not just a fee charged to merchants. It is shaped by the interaction of three dimensions: merchant attributes, consumer behavior, and transaction geography. Understanding how these factors interact is essential for building an effective cost-optimization strategy.
Different industries carry different levels of risk and compliance requirements. High-risk sectors, such as travel, digital content, and gaming, often face higher fees and stricter reviews, while physical retail and B2B trade typically enjoy lower cost levels.
Merchants with better KYC (know-your-customer) quality, strong compliance records, and healthy chargeback ratios often receive lower pricing and faster settlement cycles.
Transaction scale and frequency also matter. High-volume merchants usually benefit from pricing discounts, while small but frequent transactions increase operational and clearing costs.
Payment method choice strongly affects cost. Credit cards, local wallets, and emerging options such as BNPL (buy now, pay later) and crypto each carry different fee levels, FX costs, and risk models.
Virtual goods, subscription services, and high-refund categories tend to generate higher risk premiums and expenses for dispute handling.
Payment experience impacts overall cost structure. Complex checkout flows increase abandonment and reduce conversion, while higher chargeback rates raise risk-related fees.
Local payments and domestic clearing systems generally offer shorter chains and lower costs. Cross-border payments involve international networks, multiple intermediaries, FX conversion, and stricter compliance checks, resulting in higher total expenses.
Regulatory differences, FX controls, and financial-infrastructure maturity vary widely by region and directly influence settlement speed and fee structure.
Examples of how these dimensions interact:
- High-risk merchants using credit card payments in emerging markets typically incur the highest costs because of risk premiums, card scheme fees, and expensive cross-border clearing.
- Compliant B2B merchants using local payment methods in mature markets usually face the lowest costs due to low-risk classification, inexpensive domestic rails, and stable regulatory frameworks.
- Large-scale merchants using e-wallet payments and multi-currency settlement benefit from scale-driven fee discounts, lower channel costs, and reduced FX loss through multi-currency accounts.
- Virtual goods businesses operating in regions with high refund rates and strict regulations face significant cost pressure because refund volume and compliance requirements drive expenses upward.
Q8: Does industry type affect payment service fees? Why?
Yes. Every merchant receives an MCC (merchant category code) that signals its industry type and typical risk level. Payment providers use risk-based pricing, so industries with higher fraud or chargeback rates naturally pay higher fees. This is driven by industrywide behavior, not by the performance of a single merchant.
High-risk categories such as gaming or digital tipping often face higher interchange and scheme fees. Low-risk sectors like restaurants or supermarkets usually enjoy lower costs due to fewer disputes and smaller transactions. For example, a USD 10 restaurant payment may cost 2–3%, while the same amount in gaming can reach 5–6%.
In short, MCC is the system’s core tool for standardizing and pricing industry risk.
Q9: If an overseas customer shops on a merchant’s independent website and chooses a payment method the merchant does not control, how does it affect the merchant’s costs?
The payment method affects cross-border costs because different tools carry different risk levels for payment providers.
Credit cards involve bank funding, so merchants face higher chargeback and fraud risks, resulting in higher fees. Premium cards tend to add benefits that increase service costs, although their holders usually have stronger credit and spending power. Transaction context matters too, as in-person payments are lower risk and cheaper, while online cross-border card-not-present transactions are high risk and costlier.
In short, a customer’s choice signals risk to banks, directly shaping the merchant’s cost structure.
Q10: Does the specific transaction scenario of an overseas customer affect payment costs?
Yes. The transaction scenario often reveals risk more clearly than the product category, which directly affects the merchant’s payment costs. Even the same customer buying the same type of product can incur very different fees depending on how the transaction occurs.
For example, buying an airline ticket on the airline’s official website is considered lower risk than purchasing through a third-party platform. The latter adds intermediaries, increasing the chance of refunds or disputes, so fees are typically higher.
Similarly, digital goods such as in-game items carry higher risk than physical cross-border products because they lack delivery proof and are delivered instantly. Transaction characteristics such as instant payments, cross-time-zone purchases, or frequent low-value payments also raise anti-fraud challenges and costs.
In other words, payment systems focus not only on what is being sold but also on how it is sold.
Q11: Local acquiring is said to reduce payment fees. Is that true?
Yes. Local acquiring means the card issuer, acquiring bank, and customer are all in the same country, so transactions avoid cross-border clearing and typically incur significantly lower fees.
The real value of local acquiring goes beyond lower fees. It reduces overall operating costs, increases success rates by adapting to local payment habits, and minimizes chargebacks, delayed settlements, and currency fluctuations.
Strategically, local acquiring helps merchants establish compliant local entities, gain regulatory and tax advantages, and improve competitiveness. For example, a cross-border e-commerce platform relying solely on international acquiring may pay 3–4% per transaction, while local acquiring can reduce fees to 1–2% and improve conversion rates, often generating more profit than the fee savings alone.
In short, local acquiring is not just a cost-saving tool but a key strategy for long-term market growth.
“Cost-proofing” cross-border payments
Minimizing cost alone is not enough. Strategic thinking matters too. Success rate, experience, settlement speed, and FX optimization often outweigh small differences in fee percentages.
Antom combines technology and operational expertise that can help merchants align their payment systems with broader business goals.
Q12: How can cross-border merchants achieve the lowest payment service fees?
Many merchants focus solely on the lowest fee. While Antom offers highly competitive rates, fees should be only one factor when choosing a payment service.
In cross-border business, payments are not just the final step, they directly impact conversion rates, cash flow, and overall brand experience. Higher success rates mean fewer failed orders and more revenue, and smoother experiences and fewer redirects increase completion rates.
More payment channels help reach new markets and satisfy diverse consumer preferences, while faster settlement improves cash flow and reduces financial risk. Hidden costs such as currency exchange differences and cross-border fees can outweigh nominal service fees.
The strategic approach is to view overall payment efficiency as the core of cost management. It is not about who is cheapest but who is more efficient, stable, and supportive of growth. Small improvements in success rate, settlement speed, or exchange spreads can deliver far greater benefits than minor fee differences.
Key considerations for strategic cross-border payments include:
- Payment success rate: Determines revenue and system stability.
- Channel coverage: More channels and types improve conversion and retention.
- Payment experience: Simpler processes increase checkout completion.
- Settlement speed and cash flow: Faster funds availability enhances financial flexibility.
- Currency and cross-border costs: Hidden spreads and fees accumulate significantly.
True cost optimization balances fees, experience, and efficiency. Using data-driven multichannel strategies to achieve higher success rates, better UX, and faster settlements is the most sustainable way to reduce payment costs and drive business growth.
Q13: How should merchants understand the balance between payment cost and payment success rate?
In payment systems, cost and success rate are often competing metrics. Choosing the channel with the lowest fee may backfire if authorization rates are low, risk controls are strict, or payment data is incomplete, leading to failed transactions and lost orders. In other words, saving on fees could mean paying with failures.
The smart approach is data-driven, not guesswork. Merchants can model success rate, transaction volume, average order value, and MDR (merchant discount rate) fees together. For example, a cross-border merchant who processes USD 1 million per month might save USD 2,000 with a low-fee channel, but a 5% drop in success rate could cost USD 50,000, which far outweighs the savings.
Savvy merchants focus on overall efficiency rather than a single fee. Systems such as Antom’s APO smart routing use real-time data and algorithms to select the optimal payment path, ensuring high success rates while optimizing total cost for a win-win of low cost and high approval.
Q14: Integrating multiple local payment methods can optimize customer experience but increases technical and channel costs. How can merchants determine whether the investment is worthwhile?
Integrating multiple local payment methods does increase development and maintenance costs, but the improvement in order completion and customer satisfaction usually justifies the investment. Decisions should consider local user preferences, payment success rates, average order value, and user retention.
Optimizing payment experience follows the same principle. Features such as one-click payment may require extra development, but they significantly reduce cart abandonment and increase conversion and repeat purchase rates. Offering incentives to steer users toward lower-cost payment options can create a win-win for experience and cost.
Investments can be evaluated by comparing the additional revenue from increased successful transactions and higher conversion rates against development and channel costs.
Solutions such as Antom’s EasySafePay allow first-time users to enable in-app payments without redirecting to another app, with subsequent transactions processed automatically.
Choosing the right multichannel strategy ensures every dollar spent drives order growth, improves overseas user payment willingness, and supports steady business expansion.
Q15: How do the speed of funds settlement and currency fluctuations in cross-border transactions affect profits?
Cross-border payments involve more than just transaction fees. Slow settlement ties up funds, reducing cash flow efficiency and affecting inventory and market expansion. For cash-sensitive merchants, this can translate into additional carrying costs every month.
Currency fluctuations at settlement can also cause hidden losses. These costs often do not appear in MDR fees but gradually erode profit, especially for high-value or high-frequency transactions.
Antom leverages expertise in risk management, settlement, and currency conversion. Optimized payment channels, smart routing, and hedging strategies accelerate fund settlement and reduce exchange risks. This balances payment costs with operational efficiency, protecting profit margins effectively.
Closing remarks
Cross-border payments are complex, and costs extend far beyond visible fees. Understanding the interplay of transaction type, payment method, geography, and risk is essential for managing expenses and protecting margins.
Merchants who focus solely on low fees risk lost revenue, while those who optimize for payment success, settlement speed, and user experience can achieve both cost efficiency and business growth.
Solutions such as Antom’s data-driven routing, local acquiring, and wallet integration can help merchants navigate these complexities, stabilize costs, and turn payment strategy into a competitive advantage.
Ultimately, a holistic, strategic approach to cross-border payments transforms cost management from a necessary burden into a driver of profitability and sustainable expansion.
This article was published in partnership with Antom.