In which model are interchange fees primarily associated with the relationships between different entities?

In the four-party model, interchange fees are a key component of the relationships established between the various entities involved in a payment transaction. This model includes four distinct parties: the cardholder, the merchant, the issuing bank (which issues the card to the cardholder), and the acquiring bank (which processes payments for the merchant).

Within this structure, when a cardholder makes a purchase, the interchange fee is charged by the issuing bank and is typically paid by the acquiring bank. This fee helps facilitate the transaction and compensates the issuer for handling the risks and costs associated with providing credit or debit cards. This division of roles highlights the interconnectedness of the parties involved and the financial flows between them, which is central to the four-party model.

In contrast, the other models listed either do not incorporate interchange fees in the same way (like the three-party model, where the issuer and acquirer are the same entity), or operate under different structural dynamics that reduce or eliminate the need for interchange fees, such as in closed-loop systems where the payment process is more straightforward and does not involve multiple financial institutions.