For most international travel businesses, card payments are treated as background infrastructure. They work, they scale, and as long as transactions are completing, they rarely attract strategic attention.
Yet for businesses selling across borders, particularly into Europe, the way card payments are structured can quietly but materially affect profitability. At the centre of this sits interchange.
What is Interchange?
Interchange is the fee paid from the acquiring bank to the cardholder's issuing bank on every card transaction. While it is often described as unavoidable, interchange is not uniform. It varies significantly by region, and for travel businesses operating internationally, those differences can shape margins far more than many expect.
In Europe, interchange on consumer credit cards is fixed at 0.3 percent. That figure is set in regulation and applies consistently across European markets. In contrast, interchange in markets such as the United States typically sits between 1.6 and 1.8 percent, depending on card type, with premium and rewards cards often sitting at the higher end of that range, before scheme fees are even applied.
Those rewards are not funded by card issuers. They are funded by merchants.
The High Cost of Non-Local Processing
For a travel business selling to European customers from outside Europe, this creates a structural cost question that is often overlooked. If a European card transaction is processed through a US or Australian acquiring environment, it is priced at US or Australian interchange levels, even though the customer is European and paying in a European currency.
The booking itself has not changed. The customer has not changed. The only difference is where the payment is processed.
Turning Lost Revenue into Profit
The implication is straightforward. European sales processed by merchants based offshore are starting from a higher interchange base, and thats before cross-border and other scheme fees are even applied. On high-value travel bookings, that difference is not marginal. Moving from interchange of around 1.6 to 1.8 percent down to 0.3 percent represents a saving of roughly 1.3 percentage points per transaction before any other costs are considered.
For travel businesses selling at scale, this is not an accounting detail. It is a material margin issue.
Why EU Regulations Don't Automatically Protect You
The reason Europe looks so different is regulatory intervention. Interchange was capped to prevent fee inflation, protect competition and stop interchange being used as a proxy for risk pricing. Travel, which had long been categorised as high risk due to long lead times and advance payments, benefited from the creation of a predictable and transparent cost base.
What that regulation does not do is automatically protect European transactions that are processed offshore. The cap applies at the point of sale, not the headquarters address of the travel business. If payments are routed through a non-European acquiring setup, European interchange protections simply do not apply.
This is where payment localisation becomes relevant.
The Strategic Advantage of Payment Localisation
By processing a European card payment domestically for the cardholder, rather than treating it as a foreign transaction tied to the merchant's home market, European interchange rules can apply. The travel business continues to sell globally and fulfilment remains unchanged. However, the payment itself is treated as local to the customer.
In practice, this often involves structuring payments so that there is a local merchant presence for payment acceptance alongside the operational entity responsible for delivering the travel product. For travel businesses, which already operate across jurisdictions, this separation is often far less disruptive than assumed.
The financial effect is immediate. Lower interchange reduces the baseline cost of every European booking without affecting pricing, conversion or customer experience. Unlike supplier renegotiations or yield adjustments, the benefit applies uniformly across all eligible transactions.
This matters particularly for travel because payment costs scale directly with revenue. As European sales grow, so too does the cost exposure if transactions continue to be processed offshore. Over time, that exposure can erode margin in a way that is difficult to recover.
What is striking is how rarely this is addressed strategically. Many travel businesses invest heavily in distribution, marketing and supplier optimisation while leaving payment architecture unchanged for years. Yet payments touch every booking, every day.
Future-Proofing Your Payment Strategy
Localising payments is not about chasing marginal gains. It is about aligning payment costs with the markets being served.
For international travel businesses selling into Europe, understanding where interchange is applied, and why, is now part of responsible commercial management. It is one of the few areas where structural change can deliver immediate, measurable impact without increasing prices or altering the customer journey.
This is why payment strategy is increasingly being discussed at board and CFO level rather than treated as a purely operational concern.
How Repayd Can Help You
Specialist payment providers such as Repayd work with travel businesses to structure payments in a way that reflects how and where bookings are actually made, helping ensure that European transactions are not unnecessarily priced at offshore interchange levels.
For travel businesses selling globally, the question is no longer whether payments work. It is whether they are working as efficiently as they could.
If you are reviewing payment costs across regions, or want to understand how localisation might apply to your business model, it is worth speaking to our specialist team to understand how we can boost your travel margins at a structural level.
