MEPs voted to cap interbank fees for all card payments on Thursday (3 April) , including business cards. EURACTIV France reports.
Regulation on interbank fees has finally been passed by the European Parliament during its penultimate plenary session. The law will limit Multilateral Interchange Fees (MIFs) paid from the retailer’s bank to the consumer’s bank during all card payments. These fees currently vary greatly between different EU member states.
The MEPs decided on a cap of 0.3% of transaction value for credit cards and €0.7, or 0.2%, for debit cards for all national and transnational transactions. The caps will come into force one year after the law is applied.
According to the European Commission, interbank fees for card payments cost European retailers more than €10 billion every year. These costs are often handed off to consumers, which lead to price inflation.
Pablo Zalba Bidegain, vice-president of the European Parliament Committee on Economic and Monetary Affairs (ECON), claims that “the law is major progress in the harmonisation of payment services. It establishes a level playing field at the heart of the single market”.
Uncertain price deflation
The cap should reduce the costs of bank cards for consumers. However, this scenario has been contested by bank card providers like Visa and MasterCard, who believe that the capping of fees will not impact the consumer. On the contrary, they argue that the cost of bank cards will increase.
“Although the idea of capping interchange fees seems politically attractive, such a measure makes no sense if consumers and small businesses end up paying more for bank cards” warns the American company MasterCard in a communiqué.
During the plenary session, commissioner for climate Connie Hedegaard (standing in for Michel Barnier who was attending a Euro Group), claimed that “we have worked for a long time on this proposal. Certain operators have criticised it, but it has been welcomed by retailers and consumers.”
MEPs decided to include business cards in the law, therefore going against the European Commission’s initial proposition which had not planned to cap them.
The inclusion of business cards was hotly debated during the preliminary discussions on the law.
“We believe that these cards are much less used and we do not think that a similar cap needs to be imposed on this type of card, but we are ready to examine it as a future possibility,” said Commissioner Connie Hedegaard. Pablo Zalba Bidegain also claimed that “we want to exclude commercial cards” during the early stages of the debate.
The inclusion of business cards will upset card providers like MasterCard and Visa. Indeed, interbank fees on business cards are much higher than those imposed on consumer cards.
MasterCard is not impressed by the MEPs’ decision, and stated: “Commercial cards are considerably different to personal cards in the way they work, are used and their economic stakes. They did not feature in the initial proposal and no impact evaluation was carried out. If professional cards are arbitrarily treated in the same way as personal cards they will become too expensive for a lot of small businesses.”
A post-election adoption
Despite the Parliament’s vote, the road to adopting the law is still very long. With the upcoming European elections (22-25 May), it is almost impossible that it will be adopted by the end of this mandate.
The amended law will be passed on to the next European Parliament. The legislative chamber claimed that the new MEPs will “not decide to restart the project from scratch and will continue the work of the current parliament.”
A booming market
Card payments have witnessed continuous growth across Europe. In France, the average person carried out 276 transactions per year compared to the European average of 187. In 2012, 47% of French transactions were carried out by card, 5% higher than the European average.
Payment by card is growing faster than any other type of payment, growing by 7.1% in France in 2012. In Europe, growth of card payments is even stronger, recording a 7.3% increase in 2012.
Nevertheless, disparities between different EU member states remain high. Even if the European average for card payments was 79 per card, the same was 224 in Denmark, 39 in Germany and only 5 in Bulgaria.
Bernadette Vergnaud, vice-president of the Commission on Internal Market and Consumer Protection (IMCO):
“These services, or “interchange fees”, are imposed by banks that use Visa or MasterCard, and who, together, control most of the market.“
“Retailers must pay for every transaction carried out by bank card and add the costs of these fees to the price of the goods or services they offer.”
“Today, retailers are often obliged to accept all cards regardless of their system, even if it would be better for them to only accept cards with low interchange fees. In accordance with the new law, retailers will be free to choses which cards to accept, unless they are subject to the same interchange fees.”
Following today’s vote in the Plenary, a Visa Europe spokesperson commented: “We are disappointed in today’s outcome with commercial cards still in scope and further work remaining for the member states to address key outstanding issues such as the proposed interchange caps, which are set arbitrarily and without impact assessment to justify €0,07 for debit transactions, or consideration of how low-value electronic payments will be effected.
The proposed debit interchange level is not only below issuers’ costs in providing electronic payment provisions, but is lower than the typical cost of using cash for the same transaction. Member states should ask themselves who is truly likely to carry the burden of funding this cost gap? insisted the spokesperson.
"Weighted averages, rather than interchange caps, allow for much needed flexibility in markets to address their individual needs and readiness. They also enable continued development and delivery of secure and innovative payment solutions for the benefit of both retailers and consumers,"she said.
Visa Europe urged member states to consider the unintended impacts resulting from interchange caps that do not allow for domestic adaptation.
A multilateral interchange fee (MIF) is an interbank payment made for each transaction carried out with a consumer card.
In a long legal battle waged against what are seen as unfair practices of payment cards groups, the European Commission fined Visa (which is currently under a new investigation) and took on MasterCard for its MIFs. In May 2012, the EU Tribunal upheld the EU executive move against MasterCard.
In an attempt to turn the tribunal's decision into law, the European Commission proposed in July 2013 new legislation capping MIFs at 0.2% of the transaction value for debit card payments, and at 0.3% for credit cards.
- 22-25 May 2014: European elections in the 28 EU member states