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EU bid to limit card fees set to win full backing
EUROPEAN Union (EU) nations are poised to throw their weight behind plans to cap the fees that banks can collect on Visa Europe and MasterCard transactions, as the bloc seeks to reduce charges imposed on retailers.
Governments are set to reach an agreement on a system of limits for so-called interchange fees on debit and credit card payments, along with other conduct rules for card providers, according to an EU document seen by Bloomberg News. American Express, the biggest credit card issuer by purchases, could escape the full force of the measures but it would have to comply with the fee caps when it works with other companies to issue cards.
Interchange fees are "one of the key practices hindering the functioning of the internal market in card-based payments", according to the document from Italy, which holds the rotating presidency of the EU, and so chairs meetings of national officials working on draft European laws.
EU antitrust regulators have targeted the fees, a type of payment made between retailers' and consumers' banks as part of debit- or credit-card transactions, for more than a decade. The European Commission has argued that the way interchange charges are collectively agreed on is anti-competitive.
Visa Europe, operator of the EU's largest payment-card network, pledged earlier this year to reduce interchange fees on credit-card transactions to end an antitrust investigation. New York-based MasterCard in September lost a court challenge against some curbs imposed by EU competition regulators.
Alongside the antitrust measures, the Brussels-based commission, the 28-nation EU's executive arm, published a draft regulation in July to curb the fees in a more comprehensive way. The draft plans focus on cards issued to consumers, rather than "commercial" cards.
While retailers have long called for the fees to be scrapped, payments providers warn that the move would backfire and drive up costs for consumers.
The EU proposals, like the antitrust probes, target so-called "four-party schemes" like Visa and Mastercard, where payments are handled by the banks used by the retailer and the customer. In "three-party schemes", like American Express, the card provider, not the banks, stands in the middle of a transaction.
"EU member states should focus on ensuring that all players in the payments market are treated equally," Jason Lane, group executive for European business development at MasterCard Europe, said in an e-mail.
Still, MasterCard remains concerned that "some forms of implicit interchange operated by three-party schemes are not fully captured by the proposed legislation," Mr Lane said. "This new legislation will not make sense if it creates a competitive advantage for the most expensive players on the market." Bloomberg