Scheme Fees: Why German Merchants Are Seeing the Cost of Cards Soar

05th March 2020
Robbie MacDiarmid
Robbie MacDiarmid

European merchants are continuously being impacted by rocketing scheme fees, which have been significantly increasing costs year on year since 2016. For many, it has become an inevitability of processing card payments. With numerous methods of accepting payments available in the German market, and with Visa and Mastercard being just one small component of the region’s complex payments landscape, it is perhaps surprising merchants in Germany are – in many ways – bearing the brunt of these soaring costs.

Scheme fees in Germany are both high and disproportionate to the amount of transactions they actually process. Visa and Mastercard currently have a relatively low market share. However, in sectors where they do have market share – in hotels, tourism and travel, for example – merchants are obliged to either accept the higher fees associated with the global card schemes, or risk going out of business. The charging structures are also extremely complex, with additional margins often added in by processors.

With Visa and Mastercard transactions growing across the German market, these high fees are set to become an increasingly worrying problem – and merchants operating in this region must seek to identify efficiencies in order to mitigate the impacts.

Dominating Hospitality

The German payments landscape remains cash-heavy, with usage stable at around 30% of the total value of consumer payments (Figure 1). Culturally, consumers prefer paying smaller transaction totals with cash and shy away from credit card spending.

Card payments are dominated by the local debit scheme, Girocard, with Visa and Mastercard yet to fully impose themselves on the market: only holding a combined 37% market share (Figure 2). The vast majority of this comes from credit and non-domestic debit card spend, even though Girocard cards are typically co-badged with one of the international schemes.

Co-badging is when more than one payment scheme is available on a single card. This, in most instances, allows the merchant or consumer to choose which scheme the transaction is processed by. In the U.S., one debit card could have more than 8 available card schemes on it!

While the card schemes may not be dominant in the overall landscape, they do dominate certain sectors. Merchants reliant on tourism, such as those in the hospitality, travel or airline industries, may find accepting Visa and Mastercard is near essential in the absence of other ubiquitous competitors across tourists’ home markets. In response to this, the global card schemes appear to be leveraging their market power in these sectors and increasing scheme fees: since 2015, Visa has increased scheme fees by 67%, while Mastercard fees have exactly doubled in the same period (Figure 3).

Mastercard fees are the largest of the two schemes in Germany, most likely due to fees that CMSPI would deem ‘innovation fees’ that merchants are obliged to pay when accepting transactions using the card network. These fees, like the common Market Development Fund fee, are used by the networks to fund projects aimed at increasing spending, awareness and usage of payment cards, which are significantly more expensive for merchants to accept in Germany than cash, Girocard, or direct debit (ELV/OLV) (Figure 4). A typical credit card transaction costs around four times more than a typical cash transaction, according to Bundesbank figures for 2019.

The innovation fees charged to merchants are not insignificant, either. Fees designed to tighten the global card schemes’ grip on payment markets, such as the ‘Card Payment Promotion Fund Fee’, amount to a total of 0.06% plus 0.3 eurocents for each domestic Mastercard transaction, while inter-regional transactions are subject to up to 0.119% plus 0.15 eurocents of these fees. Similarly, domestic and inter-regional ecommerce Visa transactions attract ‘development’ fees of 0.0163% and 0.4063% (rising to 0.5063% in April 2020), respectively.


Mastercard Domestic Scheme Fees For Innovation

  • Innovation fund : 0.01%
    •  “Fund charged to support new and innovative projects in the [German] card industry.”
  • Market development fund: 0.015%
    •  “This fund finances various customer-related activities, focusing on building brand awareness and card activation, increasing purchase volumes, cross‐border card usage, and other activities.”
  • Acceptance development fund : 0.02%
  • Card payment promotion fund : 0.015% + EUR 0.003
    • “Mastercard created the Card Payment Promotion Fund to advocate the development of card payment solutions in [Germany].”

Visa Domestic Scheme Fees For Innovation

  • Business Development Contribution: 0.0063%
  • Electronic Commerce Development Fee: 0.01%


German merchants are paying excessive scheme fees in order to fund projects that are likely to ultimately increase their costs. Sectors with high tourist or credit card spend, where Visa and Mastercard acceptance may be seen as essential, are effectively subsidising the expansion of card payments into other industries and regions – allowing the card schemes to maintain already abnormal profits while growing their presence.

Soaring scheme fees are nothing new, and they’re certainly not isolated to Germany – but with additional fees above and beyond the increases we’re seeing across Europe, and with Visa and Mastercard pushing for further market share in the region, scheme fees are becoming a huge concern for German merchants.

Currently, Visa and Mastercard transactions remain a relatively small proportion of transactions in this market: as a result, the associated costs are often overlooked. Invoices are extremely complex, with even interchange ++ invoices lacking adequate visibility, therefore reducing the associated costs can be very difficult.

Merchants must look to audit their current arrangements, benchmarking their fees against merchants in their sector, with similar payments profiles and in the same markets, in order to be fully confident their costs are minimised. By achieving full visibility into costs and understanding exactly what each fee is for – and what can be negotiated – merchants can engage with their supply chain to significantly reduce the cost of card transactions.

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