Interbank Credit Card Fees Face Cap in Europe

     (CN) – Europe’s payment market saw sweeping changes Wednesday that aim to end persistent and excessive interbank fees major credit card companies charge.
     Earlier this year, the European Commission announced it would probe whether Mastercard stifles competition by charging interbank fees to foreign tourists shopping in the EU. Europe’s highest court is even now considering Mastercard’s challenge to the commission’s 2007 ban of such fees for cross-border transactions.
     A similar investigation into Visa’s practices led commissioners to initiate the new scheme, which will eventually cap the fees – known in Europe as interchange fees – to 0.2 percent of transaction value for debit cards and 0.3 percent for credit cards. The cap exempts all business, American Express and Diner’s Club cards, but new rules enable retailers to either charge those customers with those cards a fee or refuse to accept them at all.
     “Interchange fees are included in the retailers’ costs of receiving card payments and are ultimately paid by consumers through higher retail prices,” the commission said in a statement. “They are unseen by consumers but cost retailers and ultimately consumers tens of billions of euros every year. The level of the interchange fees varies widely between the member states, which suggests that they do not have a clear justification and create an important barrier between the national payment markets.”
     Joaquin Almunia, the commission vice president in charge of competition, noted that consumers are left holding the tab for the interchange fees retailers pay.
     “Not only are consumers generally unaware of this, they are even encouraged through reward systems to use the cards that provide their banks with the highest revenues,” Almunia said in a statement. “Complementing the enforcement of antitrust rules, the regulation capping interchange fees will prevent excessive levels of these fees across the board. A level playing field will be created for payment services providers, new players will be able to enter the market and offer innovative services, retailers will make big savings by paying lower fees to their banks, and consumers will benefit through lower retail prices.”
     The new plan also regulates the burgeoning market of payment initiation services – like Paypal in the United States – that operate between the merchant and the purchaser’s bank to allow for cheap and fast payments without the use of a credit card. Regulators urged these new services to step up their security by adding “strong customer authentication for payments.”
     Consumers should find the scheme better protects them against fraud and disputed payments, the commission said. The plan also lowers consumer liability from about $200 to $66 in the event of an unauthorized credit purchase.

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