In its final sector inquiry report, issued on 31 January 2007, the Commission states that there are a number of competition concerns in the markets for payment cards, payment systems and retail banking products, which are reflected by large variations of payment fees.
Competition Commissioner Neelie Kroes said: "The inquiry has found widespread competition barriers which unnecessarily raise the cost of retail banking services for European firms and consumers."
The payment cards industry has an overall consumer payments value of €1,350 billion generating an estimated €25 billion in fees per year, according to the Commission. Particular areas of concern are:
- Highly concentrated markets in many member states;
- large variations in merchant fees across member states;
- large variations in interchange fees between banks across the EU;
- high and sustained profitability;
- rules and practices that weaken retailer competition, and;
- divergent technical standards across the EU.
The issue of interchange fees is the main point of discussion between the Commission and the industry. While payment networks, such as VISA and MasterCard argue that this fee is "vital" to efficient functioning of their systems, the Commission says that there is "no economic evidence" to this and "most card issuers would remain profitable with very low levels of interchange fees or even without any interchange fees at all".
However, the Commission does not go as far as to propose a complete scrap of interchange fees, but requires them to be set "at a fair level", which it will review on a case-by-case basis.
Kroes made it clear that the Commission will not hesitate to "make full use of its powers under competition law to tackle these barriers, in the market for payment cards and elsewhere when they result from anticompetitive behaviour".
The retail banking industry, which the Commission estimates to generate €250-275 billion gross income per year, amounting up to 2% of EU GDP, is found to be fragmented along national lines, divided by competition barriers and regulatory, legal and cultural differences. More specifically, the Commission found competition problems in the following areas:
- Conjunction of high profitability, high market concentration and entry barriers in some member states;
- credit registers may be used to exclude new entrants;
- cooperation among banks;
- product tying, and;
- obstacles to customer mobility.
