What is meant by domestic interchange in payments?

Domestic interchange in payments refers to the transaction that occurs within the borders of a single country, specifically involving the exchange process between a card issuer and a merchant acquirer for card-based payments. This concept is crucial as it impacts the fees that merchants and financial institutions incur during transactions.

In a domestic interchange transaction, both the cardholder and the merchant are located within the same country, which means that any associated fees, rates, and processes are governed by national regulations and norms. This is distinct from international or cross-border transactions, which would involve multiple currencies and different regulatory environments.

Understanding domestic interchange is essential for professionals in the payments industry, as it influences the overall cost structure of card processing and can affect pricing strategies for merchants. This clarity around domestic transactions ensures that individuals and businesses are better equipped to navigate the financial landscape of payment processing.