Scheme (Network) Fees Are Outpacing Transaction Growth. And It's Not Just Australia. (Part 2 of 3)
In Part 1 of this series, I walked through the RBA's proposed interchange reforms and what they mean for issuers and acquirers in Australia.
But there was one data point buried in the RBA's analysis that deserves its own conversation:
Net scheme fees paid by Australian participants hit A$2.0 billion (~US$1.4 billion) in 2024/25. That was 11% growth year-over-year.
And the RBA's Payments System Board said explicitly that growth in net scheme fees for domestic transactions has noticeably outpaced transaction growth since 2021/22.
Scheme fees growing faster than the underlying transaction base should get your attention regardless of which market you operate in.
Because this is the pattern: interchange gets regulated first, then attention turns to the rest of the fee stack.
What is the "waterbed effect" in interchange regulation?
Economists and regulators have a name for what happens next. They call it the waterbed effect.
The concept is straightforward:
When you press down on one side of a two-sided market (interchange caps that reduce merchant costs), the other side adjusts upward (fees elsewhere in the system).
Sometimes that shows up as higher cardholder pricing. In many markets, it increasingly shows up as scheme fees(network fees) rising across the board.
The academic literature is extensive. Researchers like Rochet and Tirole established the theoretical framework, and empirical studies of Australia's original 2003 interchange reforms, the EU's Interchange Fee Regulation, and the US Durbin Amendment have documented the effect in practice.
This isn't a theory at this point. It's an observed pattern that has repeated across major jurisdictions that have regulated interchange.
The waterbed effect doesn't mean interchange regulation is wrong. It means the cost savings don't always land where regulators intend, and the networks are sophisticated at rebalancing their economics when one revenue line gets compressed.
Are Visa and Mastercard scheme fees rising across regulated markets?
Australia's scheme fee trajectory is notable because the RBA actually published the data. Most markets don't have that level of transparency.
But the dynamic is showing up wherever regulators have capped interchange.
European Union
The EU's Interchange Fee Regulation took effect in 2015, capping consumer credit interchange at 0.30% and debit at 0.20%.
The caps delivered real savings on interchange. But in the years since, Visa and Mastercard scheme fees in Europe have increased substantially, to the point where the European Commission has been actively probing Visa and Mastercard's fee structures, sending detailed questionnaires to retailers and payment service providers into whether scheme fee structures pose an undue burden on European retailers.
Retailers and industry groups have argued that scheme fee increases have eroded a significant portion of the savings intended by the 2015 Interchange Fee Regulation. EuroCommerce, the trade group representing large European retailers, has flagged scheme fees as a significant and growing cost burden across the EU.
The investigation is examining processing fees, "behavioral" or "compliance" fees, and whether merchants can negotiate any of these charges with Visa and Mastercard. Scheme fee schedules in Europe have grown in complexity to the point where some acquirers report difficulty reconciling their actual costs against published fee structures.
This is no longer an industry complaint. It's a regulatory investigation.
United Kingdom
The UK is fighting on two fronts.
On interchange, the post-Brexit removal of EU caps allowed cross-border CNP rates to jump to 1.15% for debit and 1.50% for credit on EU-to-UK transactions. The Payment Systems Regulator found these increases were unduly high, costing UK merchants an estimated £150-200 million per year. A UK court recently cleared the PSR to proceed with a proposed price cap regime on cross-border interchange, dismissing legal challenges from both Visa and Mastercard.
On scheme fees specifically, merchants have filed separate litigation targeting the rising cost of scheme fees as a distinct issue from interchange. That signals the UK fight is expanding beyond interchange into the broader fee stack, mirroring the direction the EU and Australian regulators are already heading.
United States
The US interchange landscape is shifting fast, though scheme fees have received less direct regulatory attention than in Australia or the EU.
On debit, the Durbin Amendment cap is in legal limbo after a federal court vacated the entire Regulation II framework in August 2025, finding the Fed exceeded its authority. The ruling is stayed pending appeal, so the existing cap of $0.21 + 0.05% remains in place, but the long-term future of US debit interchange regulation is genuinely uncertain.
On credit, the Credit Card Competition Act was reintroduced in January 2026 with bipartisan support and a Presidential endorsement. The bill would require large issuers to enable at least two competing network options on each credit card. It hasn't passed yet, but sponsors are actively seeking a legislative vehicle, and it has more political momentum than in any prior session.
Our own client data tells the same story. Across the issuer and acquirer portfolios we analyze through CardTraq, we've seen approximately a 30% increase in scheme fee unit costs over the last five years. That's not total spend growing with volume. That's the cost per transaction rising independent of growth.
The US hasn't yet seen the kind of targeted scheme fee scrutiny that Australia and the EU are pursuing. But the economic dynamic is the same, and US issuers and acquirers are absorbing the same fee growth whether regulators are watching or not.
Why do card networks keep raising scheme fees?
It's worth being honest about why the pattern repeats.
Visa and Mastercard are publicly traded companies with quarterly earnings targets. Interchange regulation compresses one revenue line. The networks respond by growing others.
Their earnings filings don't break out scheme fees as a standalone line item, and much of the revenue growth reported in categories like "data processing" and "value-added services" reflects genuine expansion into consulting, analytics, cybersecurity, and tokenization. But the overall dynamic is clear: total network revenue is consistently growing faster than underlying payment volumes. Some of that is new services. Some of it is pricing.
The RBA's published data from Australia, the European Commission's investigation, and our own client data through CardTraq all point to the same conclusion: scheme fees are a meaningful and growing part of that gap.
Scheme fees are the most direct lever because they're paid by participants (issuers and acquirers) who have limited ability to push back individually, and historically limited visibility into what other participants are paying.
The fee schedules themselves work in the networks' favor. When your fee schedule runs to 800 pages (the RBA's characterization, not mine), with hundreds of individual fee categories that change multiple times per year, the practical ability of any single issuer or acquirer to fully understand, validate, and challenge their scheme fee exposure is limited.
That's not an accident. Complexity is a feature, not a bug.
How much do scheme fees actually cost issuers and acquirers?
The RBA data from Australia is useful because it puts concrete numbers on the trend:
A$2.0 billion (~US$1.4 billion) in net scheme fees in 2024/25
11% year-over-year growth
Scheme fees account for roughly one-quarter of merchants' domestic debit card transaction costs and one-sixthof domestic credit card transaction costs
International transaction scheme fees account for one-third of total scheme fees despite international cards representing only 3% of transactions
Acquirers paid A$1.5 billion (~US$1.05 billion), issuers paid A$0.5 billion (~US$350 million) - a disparity driven largely by the fact that issuers receive significantly higher rebates and incentives from the networks, which reduce their net costs. That also means issuer exposure is partially masked by rebate structures that are negotiated, not permanent.
In the EU, the number is €1.5 billion annually according to EuroCommerce. In the UK, the PSR documented £150-200 million in excess costs from cross-border interchange alone, with scheme fees on top of that.
Other markets don't publish this level of detail. But the underlying dynamics are the same.
If you're an issuer or acquirer and you haven't looked closely at your scheme fee trajectory in the last 12 to 18 months, you may be surprised by what you find.
Will commercial cards lose their interchange premium?
This is the question that doesn't get asked enough.
Commercial credit cards, purchasing cards, and B2B virtual cards have historically sat at interchange tiers well above consumer cards. That higher interchange funds rebate programs, working capital benefits, and AP automation value propositions that drive the B2B payments ecosystem.
In Australia, the PSB has said it's unconvinced that commercial and consumer credit cards justify different cap treatment.
If the Conclusions Paper applies the 0.30% credit cap to commercial cards without differentiation, it would compress a revenue line that many commercial card issuers and B2B fintechs have treated as a safe haven.
The implications extend beyond Australia. If one major regulator sets the precedent that commercial card interchange should be capped at consumer levels, others will take notice. The EU's IFR currently exempts commercial cards from its consumer interchange caps, but that exemption was always understood to be a political compromise, not an economic conclusion.
If Australia moves first, the EU review could follow.
For any issuer or fintech whose business model depends on high-interchange commercial or virtual card programs, this is worth watching very closely.
Are regulators going to cap scheme fees?
The RBA's approach is worth watching because it may become a template.
Rather than jumping straight to a hard cap (which no jurisdiction has done yet), the PSB laid out a graduated approach:
Mandatory transparency: schemes required to publish aggregate scheme fee data quarterly
Regulatory expectation: scheme fees should not rise relative to transaction values without clear justification
Explicit threat: if scheme fees continue to outpace transaction growth, the PSB will consider hard caps or structural interventions like mandating dual-network credit cards and extending least-cost routing to credit
That's a credible escalation path. And other regulators are already moving. The EU has opened a formal investigation. The UK's PSR is expanding beyond interchange into scheme fees. New Zealand's Commerce Commission is looking at variations of the same problem.
The direction of travel globally is clear: interchange gets capped first, then regulators turn their attention to scheme fees. Australia is simply further along that curve.
What should issuers and acquirers do about rising scheme fees?
If you're an issuer or acquirer in any regulated market, here's the practical reality:
Interchange revenue is being compressed. That's happened, it's happening, and it will continue.
At the same time, scheme fees are growing, in many cases faster than transaction volumes. That means your net economics on card programs are being squeezed from both sides.
The issuers and acquirers who manage this well are the ones who have visibility into exactly what they're paying, why, and whether it's correct.
That sounds basic. In practice, given the complexity of scheme fee schedules and the frequency of changes, it's anything but.
In Part 3, I'll get into what that visibility actually looks like and what the most effective organizations are doing to manage scheme fee exposure as an ongoing operational discipline.
Follow me for Part 3.
Steven Leitman is Managing Partner and CEO of Consulting Resource Group, a boutique payments consultancy specializing in card network fee optimization for issuers, acquirers and ISOs. Through our CardTraq capabilities, we help issuers and acquirers globally optimize profitability.