The EU proposal for a Payment Service Directive designed to limit interbank fees on all card payments will be voted on during the 3 April plenary sitting. EurActiv France reports.
Interchange or interbank fees imposed during transactions between merchant’s and buyer’s banks has long been the subject of heated debate.
At the end of February, the European Parliament’s Economic and Monetary Affairs Committee (ECON) finally adopted a law to limit interbank fees to 0.2% or 0.3% depending on the type of card (debit or credit).
MEPs also included “business” or professional cards under the regulation, which will be voted on by the European Parliament in April.
>> Read: Card fee cap degotiations begin
The inclusion of professional cards was advised by the European Economic and Social Committee (EESC) in December 2013. When consulted on the proposed regulation, the EESC made a number of recommendations, including:
“The EESC considers that commercial cards should be included within the caps at the same level as those proposed for consumer cards. There must be provision to prevent any push by card schemes towards more commercial card usage.”
A very different market
“Business” credit cards represent relatively few payments, approximately 10% of total transactions. However, they regularly represent large sums of money.
Almost all card payments (90%) do not affect consumers, because they relate to commercial transactions between businesses, known as “B2B”. Half of purchases are carried out online, and almost 60% of credit card expenditure is associated with movement (transport, hotels and restaurants).
“It is a very different market to that of public sector payments. Reducing interbank fees could have disastrous consequences for small and medium sized business” cautioned Andrew Buckley, Head of Commercial Products at MasterCard.
According to Buckley, reducing interbank fees to almost 0% risks increasing the cost of “business” cards. Depending on the country, the costs of “business” cards varies, but it is often hardly noticeable to the card holder. Banks propose extra services to professional card holders which are mainly remunerated by interbank fees. Without them, entrepreneurs will most likely have to pay more for their cards.
Returning to cash?
The MasterCard executive warns that “Small business, like plumbers, risk returning to cash or paper invoices, which too often go unpaid and amount to extra costs in terms of time and cash flow.”
French opinion is split. The Federation of French Banks published a report stating that it was monitoring proceedings in the EU, emphasising the importance of interbank fees. In contrast, the UFC (France’s First Association of Consumers) has criticised interbank fees, and would prefer to see them reduced to 0%.
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.
- 3 April: European Parliament vote in plenary session on legislation proposed by the ECON committee