Interchange ++ pricing is a pricing model that breaks down all the costs of credit card processing into three parts; interchange fee, a card scheme/card associations fee and processing fee.
Blended pricing, on the other hand, lumps all these fees together; including interchange fees, card associations fees, processor charges, gateway way fees and PCI compliance fees. In this model, merchants will only get a collective fee without knowing exactly what those charges include, in many cases, a 2.3%-2.9% + $0.30 fee per transaction.
The transparency of IC++ gives merchants insight into what they are being charged for. For example, if a retailer notices that a portion of its buyers uses debit cards (charged a lower interchange rate than credit cards), they can adjust their marketing to encourage people to use a specific payment method.
With IC++, a merchant can see the separation between the interchange fee charged by their issuing bank and the mark-up charged by their payment processor. This transparency encourages a reasonable mark-up fee from the processor. In blended pricing, a payment processor would charge 2.9%+$0.30 per transaction with an extremely high mark-up and there would be no way of knowing.
Transactions within the UK done using the Visa Immediate Debit Card-standard fee tier, for example, attract an interchange charge of 0.20% while international transactions on the same card have an interchange rate of 1.60%. These cost savings are passed down to the merchant in IC++ while in blended pricing, the payment processor can pocket the difference with you having the slightest idea.