Key rule changes designed to introduce more competition and update the credit and debit card payments landscape are set to ignite a lengthy dispute over technicalities when they come before committee in the European Parliament next week.
The Commission published its update of the Payment Services Directive in July, along with a separate regulation on multilateral interchange fees (MIFs). Both of these have elicited Parliamentary reports in advance of discussion in the economic and monetary affairs committee next week (17 December).
The updated Payment Services Directive aims to cover regulatory and security challenges posed by a range of existing card and new mobile payments services expected to explode onto the European scene over the next two years.
MIFs are charges paid by a retailer to a cardholder’s bank as part of an electronic payment card transaction, whether through a debit or a credit card.
Interchange fees to be discussed by Parliament
The Commission’s proposal would set new capped levels for MIFs at 0.2% and 0.3% of the transaction value for debit card and credit cards respectively.
The Parliament’s MIF report, presented by rapporteur Pablo Zalba Bidegain (Spain; European People’s party), retains that proposal, though some political groups are set to resist the idea.
“There we are going to have the big debate, I am not satisfied about these figures, and have asked where the 0.2% and 0.3% come from,” said Dutch MEP Sophie in t’Veld of the Alliance for Liberals and Democrats for Europe.
Meanwhile, Zalba has proposed changes to the original proposal that are expected to provoke intense discussion amongst MEPs.
He suggested allowing card companies to ask merchants to offer customers the use of all bank cards within a company's portfolio – the so-called 'honour all cards' rule, a practice the Commission wants outlawed. He also proposed that the MIF caps should be applied across a 'weighted average', giving some flexibility as to how card companies apply the caps.
Zalba amendments resisted by merchants
These amendments drew sharp criticism from merchant representatives. “The draft European Parliament report on the proposed Regulation on MIFs would water down the Commission proposal so that the majority of the potential benefits to consumers and to merchants would be lost,” according to a statement from EuroCommerce (12 December), a body representing the retail and trade sectors in Europe.
Meanwhile card companies themselves remain unhappy with the MIF proposal. “MasterCard remains deeply concerned by the preservation of the Commission’s one-size-fits-all approach to interchange across Europe, as it does not appear to be based on any clear methodology,” a statement from the company said.
Interchange levels are only one part of a complex equation, however, with the Parliament simultaneously considering its report on the main proposed update to the payments services directive.
That report, written by MEP Diogo Feio (Portugal; European People’s Party), will be considered at the the same time by the economic affairs committee, but outstanding questions arise over what sort of payments would be captured by the proposed law.
“Speaking to different people it can be hard to determine a position on these issues,” said in t’Veld, adding: “Conflicting interests may be valid interests. On whether three-party and four-party schemes are included and definitions of third party providers there remain some very complex issues.”
Dossiers are complicated, technical
The technical complications may hamper progress on the proposal, but Feio remains bullish that the Parliament can reach a compromise in time to agree the proposals before the end of its mandate.
In an interview, he told EurActiv that he is cooperating with Zalba to ensure that the two proposals progress together, and called for more simplification of language in the proposal. "It is a very technical paper," he said.
"A common denominator is that we all want more competition and more entrants into the market, and the creation of a truly open, single market for payments, it is how we achieve that there are many differences,” said in t Veld.
>> Read our LinksDossier: Payment Services Directive: The new payments landscape
“MasterCard believes Mr. Zalba’s report has addressed some critical areas of the European Commission’s proposal on interchange. MasterCard welcomes a number of positive elements in the report, such as his proposed amendments on the separation of scheme and processing and his efforts to maintain the assurance for cardholders that their cards will be accepted at any retailer accepting the brand featured on their card – regardless of the type of card being used (Honour-All-Card-Rule),” a statement from the company said.
“MasterCard welcomes Mr Zalba's intention to create a level playing field for card payments in Europe. In this regard, MasterCard would welcome further discussions on the scope of the proposal to ensure a true level-playing field for all payment providers, including 3-party schemes such as Amex and Paypal,” the Mastercard statement concluded.
“We must not let the banks and payments lobby hijack this debate. The barriers of the interchange fee must be removed to allow for competition and innovation. We call on Europe’s decision-makers not to be swayed by the scaremongering messages from banks and card schemes, and to have the courage to stand up for a competitive, cost-efficient, secure and transparent payments market which will bring great benefits to the EU economy as a whole. Consumers in Europe deserve it,” said Christian Verschueren, director-general of EuroCommerce.
The updated Payment Services Directive (PSD II), published by the European Commission last July, aims to cover regulatory and security challenges posed by a range of new mobile payments services expected to explode onto the European scene over the next two years.
The new rules form part of the Commission’s broader aim to promote a single European Payments Area (SEPA) and will seek to create a more competitive payments card market that reflects the explosion in the use of online and mobile payments.
According to a draft of the new rules, the EU executive earmarked as a key source of concern “the legal vacuum for certain newly emerged internet service providers, such as third-party service providers offering online banking-based payment initiation”.
- 17 Dec. 2013: Parliament's economic and monetary affairs committee to consider reports on payment services, multilateral interchange fees (MIFs)
- European Parliament: Webpage with amendments to PSD (24 April 2007)
- European Commission: Green Paper – Towards an integrated European market for card, internet and mobile payments (11 January 2012)
- European Commission: Frequently Asked Questions (11 January 2012)
- European Commission: Feedback statement from the consultation (27 June 2012)
- European Commission: Replies to the consultation (27 June 2012)
- European Commission:Antitrust: Commission sends Statement of Objections to Visa
- European Commission:Press release on MasterCard's decision to cut MIFs
- European Commission:Single Euro Payments Area (SEPA)
- European Commission:SEPA migration
Business & Industry
- Visa Europe:Explaining differing European MSC levels
- MasterCard Europe: Announcement on MIFs
- European Payments Council: SEPA for Mobile
- European Payments Council: SEPA Vision and Goals
- EurActiv Germany: SEPA: Unterschiede im einheitlichen Euro-Zahlungsraum