In the payments world, few things are as confusing or as controversial as network fees. The economics of a transaction routed over Visa or Mastercard rails could amount to a college-level course.

Rates for interchange, the amounts that the networks collect from retailers on behalf of card issuers, are often on merchants’ minds as they look for the most economical transaction routing options. But in recent years, the fees that the networks keep for themselves have generated plenty of ink.

Changes to the network fee structures over the past several years have clearly demonstrated that payment facilitators are on the card brands’ radar. As this emerging business model has matured, Visa and Mastercard have adapted their fees to accommodate it.

According to information obtained by, Mastercard will begin charging a new annual fee known as the “merchant location fee,” in February. That fee will be assessed to acquirers based on number of merchant locations.

While PFs may balk at another new fee, it’s worth noting that it provides a significant differential for payment facilitators. Industry sources indicate that the current stated rate for merchant locations is $15 per year, while the payment facilitator per-merchant location rate will be only $3 annually.

“In an indication of the value Mastercard sees in the payment facilitator role, the company appears to be giving substantial incentive for PFs to bring on more small merchants through the PF model,” said Double Diamond Group president Todd Ablowitz.

Mastercard is not the first to venture into charging this type of fixed fee.

Visa began charging acquirers a Fixed Acquirer Network Fee in 2012. As was widely reported at the time, Visa assessed the new fee per merchant location, and the rates varied depending on the number of locations that merchant had and whether the transaction volume was card present or card not present.

When the fee was introduced, payment facilitators were assessed according to card not present rates, and their total volume from their submerchants was aggregated under a single taxpayer ID. The monthly fee was capped at $40,000, which benefitted very large payment facilitators.

In 2015, Visa made changes to the FANF that affected PFs directly. It began requiring that they report their submerchant volume under individual merchant taxpayer IDs, rather than aggregating it. It also added new tiers with lower fees for very small merchants and eliminated the cap for payment facilitators.

On its second quarter earnings call in 2014, Visa CEO Charles Scharf shared the rationale for the changes it had made, indicating that the company had smaller merchants on its mind:

“We have made changes to our FANF structure, our Fixed Acquirer Network Fee, including modifications that are designed to lower or in some cases eliminate FANF on volume from small merchants with less than $15,000 in annual gross Visa sales. Most importantly, we believe these changes could serve to expand Visa acceptance among very small businesses. While eliminating the fees for smaller retailers, we’re also making other adjustments to FANF to improve the alignment of these fees, regardless of whether a merchant connects to Visa through an acquirer, a processor, a payment facilitator, or other party,” he said according to the transcript.

The impact of this fee revision on PFs varied widely depending on their transaction volume and number of merchants. It resulted in higher costs for some, lower costs for others, and a significant amount of number crunching for all of them. But as these types of fees evolve, they provide an indicator that payment facilitators are having an impact on the card networks as well.

“One thing that payment facilitators have done very nicely at every level is to bring small merchants into electronic payments, stealing share from cash and checks,” said PayAnywhere CEO and founder Marc Gardner. “I think the networks should avoid increasing fees that create barriers for PFs to sign up millions of small businesses. When the Visa FANF and Mastercard merchant location fees are increased, it can do just that.”