'Amex And Diners Club Should Be Included In EU Regulation on Capping Interchange Fees'

WATERLOO | The majority of high value retailers in Europe believe that the EU rules to cap interchange fees for electronic payments should only go ahead if they apply to all market players. More than half of high value retailers will not pass on savings from the proposed EU cap on interbank fees on card payments to their customers, and instead invest the money into their business. That results from new research by Ipsos MORI, commissioned by MasterCard.

Background: EC proposes cap on MasterCard and Visa Interchange Fees

In July 2013, the European Commission proposed the revised Payment Services Directive, capping the interchange fees at 0.3% of transaction value for consumer credit cards. In April this year, Members of the European Parliament amended the proposal to include business cards, which have higher interchange fees than consumer cards. The newly drafted PSD will be passed on to the next European Parliament for further examination and decision making.

Interchange Fees: more than 10 billion every year

Interchange fees are paid by the merchant's bank to the card issuing bank for every credit card payment that is accepted. Interchange fees represent a fair share of the credit card service fees charged to (online) retailers and businesses. According to the European Commission, interchange fees for card payments cost European retailers more than €10 billion every year. These merchant's transaction costs are often absorbed in their prices or surcharged to consumers, in both situations leading to higher consumer prices.

Visa Europe agreed to cap its interchange fee

Beginning of this year the European regulator agreed to Visa Europe's proposal to cap its cross-border interchange fees on credit cards to 0.3% (on average) of the value of each transaction. Visa Europe would also reduce domestic interchange rates in 10 European Union countries including Italy, Luxembourg, the Netherlands, Ireland, and Hungary. Read full article here.

The current (May 2014) interchange fee for Visa consumer cards - for cross-border transactions within the European Economic Area - is now set on 0.23% + €0.02 per transaction (for EMV, Verified by Visa and by Visa ecommerce transactions). For non-secure transactions it is set at 0.29% + €0.02 per transaction. Click here to see all Visa Europe's Interchange Fee rates.


American Express and Diners Club

The credit card schemes American Express and Diners Club, both competitors of MasterCard and Visa, are currently largely excluded from the scope of the EU ruling to cap these interchange fees. AMEX and Diners are excluded despite the fact that the European Commission acknowledges that they operate a similar interchange fee model. MasterCard has now commissioned a new survey to ask retailers about their opinion on this matter and to see whether the assumed cost savings will reflect in their pricing.

Survey Results

901 retailers participated on a country by country basis via telephone interviews. The majority (55%) of retailers surveyed would only support the proposed legislation to cap fees for electronic payments if all card network operators, including American Express and Diners Club, were covered. Only 34% would support EU legislation that excludes specific card brands. In the six countries surveyed, including France, Germany, Great Britain, Italy, Poland, and Spain, more than two in three retailers (69%) rate Amex fees higher with little difference in satisfaction of the services provided. More than half of the retailers indicated not to pass on savings to their customers, and instead invest the money into their business.

Click here to view the merchant survey infographic

Consumers and retailers to pay the price

“Although we appreciate the Commission’s and Parliament’s efforts so far to treat all players in the same way, we believe that the proposals could be improved. As they currently stand, they risk playing directly into the hands of the most expensive market players. Consumers and retailers would end up paying the price. This is hardly what the legislation was intended to achieve.” said Javier Perez, President, MasterCard Europe. 

Article by Erik van den Heuvel, About-Payments, May 13th, 2014.


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