During the public hearing on payment cards, it became clear that there are strong differences of opinion between the two major card systems and the Commission. The Commission seeks to change the pricing model in order to make it more business- and consumer friendly.
In the Interim Report, the Commission judges the profitability of payment card operations as “abnormally high”. Prices within the EU differ up to 100% for consumers and 650% for businesses, which is taken as a sign of market forces not yet working at full strength. A particular area of discussion is the issue of interchange fees, which the Commission calls a “tax on business and consumers”.
Accordingly, the Commission intends to promote competition between banks that provide card acceptance services to merchants. Further, it aims to open up the networks to enable other providers to join in.
Finally, the need to break down the barriers to cross-border competition was emphasised, so as to achieve a single payment area. This particularly concerns certain “network rules”, as well as “joint ventures”. Nevertheless, views on the level of fees diverge between banks and businesses.
The second Interim Report on Current Accounts and Related Services presents evidence that the EU’s internal market in financial services is not yet sufficiently integrated.
“Our competition analysis of the retail banking market shows that markets across the EU remain fragmented, that there are still significant barriers and that consumers and SMEs have difficulties in finding the best offers for them”, said Competition Commissioner Neelie Kroes.
The Commission has identified five sets of issues for consultation on its interim report on current accounts and related services:
- Market structure and fragmentation
- Banks’ financial performance and pricing
- Entry barriers in retail banking
- Customer choice and mobility
- Development of payment infrastructures in the context of the Single Euro Payment Area (SEPA)
Profitability rates vary greatly within the EU. While Austria and Germany represent the least profitable markets, Spain and Finland are among the most profitable.
