Scope and level of card caps remain in dispute

Debit card caps. [luchunyu/Shutterstock]

This article is part of our special report The demise of cash?.

SPECIAL REPORT: EU lawmakers disagree over the level and scope at which card payments in Europe should be capped as the issue goes into trilogue in advance of its adoption anticipated early next year.

On 24 July 2013, the European Commission proposed a revised Payments Services Directive (PSD2) and submitted a proposal for regulation on interchange fees for card-based payment transactions.

>> Read: EU eyes €6 billion savings from credit, debit card fee caps

The payments, known as multilateral interchange fees or MIFs, are charges during transactions between the merchant and buyer’s banks. Member states can lower the charge ceiling if they wish.

In April, the European Parliament voted on amendments to the legislation, which caps interchange fees at 0.2% of transaction value for debit cards and 0.3% for credit cards.

Third and four party schemes both included

Over the summer (7 July) a broad alliance of consumer and business organisations called on the Italian Presidency of the EU and the new European Parliament to make legislation capping payment card fees its “absolute priority.”

The European Payment Users Alliance backed MEP’s changes to include business cards and third-party card schemes in the scope of the legislation. Members of the alliance include FuelsEurope, UEAPME (European Association of Craft, Small and Medium-sized Enterprises), EuroCommerce, the European Modern Restaurant Association, the European Retail Round Table and BEUC, the European Consumers Organisation.

A three party card scheme, such as American Express, means the issuer of the card to the consumer and the acquirer, who has the relationship with the merchant, is the same body.

A four party scheme such as Visa or MasterCard, has a separate issuer and acquirer. The acquirer pays an issuer an interchange fee, and the merchant pays the acquirer a service fee.

The EU Council of Ministers, representing the EU member states, adopted a general approach on the interchange regulation earlier this month. So-called trilogue meetings commenced yesterday (19 November) with the European Commission and Parliament to try and broker an agreement.

The Council drafted two key compromises from the Parliament’s version.

First, it gave member states the discretion to exclude three party schemes in certain circumstances – for example when they license others to issue their cards – rather than making their inclusion compulsory.

Secondly, the domestic interchange fee on debit cards would still be capped at 0.2%, but under the Council compromise, could represent a weighted average, the annual transaction value of all domestic debit card transactions, rather than a cap on each individual transaction.

Institutions will meet again in December

Pablo Zalba Bidegain, a Spanish centre-right MEP from the European People’s party (EPP), is the Parliament’s rapporteur on the proposal.

“Having started the trilogues, I outline two main points in which the Parliament’s and the Council’s positions diverged,” he told EURACTIV. “First, the level of the caps for national debit transactions. Secondly, the scope of the regulation. Commission, Council and Parliament will be working on balanced solutions to these two conflicts ahead of the next trilogue on the 4th of December,” Zalba said.

“It is possible that there will be a swift agreement, but as the trilogue is just getting underway it is difficult to anticipate the speed of progress,” a source privy to the negotiations said.

Both Council and Parliament must agree an identical text before it can become law.

“We are all willing to find the best possible outcome in benefit of the European economy, particularly for consumers,” Zalba said.

Meanwhile the update to the payments services directive is unlikely to be agreed before next Spring, Commission sources told EURACTIV.

The revised directive facilitates the use of low cost internet payment services, giving a mandate to the European Banking Authority (EBA) to work on regulatory technical standards in this area.

The Italian Presidency has scheduled a working party on the paper to start on Monday (24 November) at the diplomatic level.

A Commission source told EURACTIV  that the executive is optimistic that a Council General Approach can be agreed under the Italian Presidency, with trilogues taking place in January under the Latvian Presidency.

A spokesman for MasterCard said: “MasterCard appreciates the Council’s efforts to treat all players in the payments market equally but believes that more can still be done in this regard. The General Approach endorsed by the ECOFIN Council (in November) builds on the positive work of the European Parliament in this area. However, MasterCard remains concerned that three party schemes are not fully captured by the proposed legislation – and that where they are covered, Member States retain the option to exempt them from the new rules.”

The Payment Services Directive (PSD) was adopted by the EU in 2007, but an explosion in e-commerce through the internet and the ownership and use of smartphones has taken place since then.

In July 2013, the European Commission tabled proposals aimed at reducing the cost of using payment cards for consumers, setting new fee limits at 0.2% and 0.3% of the transaction value for debit cards and credit cards respectively.

The new Payment Services Directive, with a separate regulation on multilateral interchange fees (MIFs), could see €6 billion annual savings for retailers, according to the proposal.

>> Read: EU eyes €6 billion savings from credit, debit card fee caps

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. Nominally, they are designed to share the cost of processing payment card transactions between buyers and sellers.

The Commission hopes that the estimated €6 billion each year that it believes will accrue to retailers will translate into price cuts for consumers.

The initiative followed a long series of antitrust investigations in the payment card market, specifically targeting MIFs.

Proceedings were opened against Visa Europe in March 2008, and similar investigations were later opened targeting MasterCard.


  • 24th July 2013: The European Commission published a proposal for a Regulation on Multilateral Interchange Fees (MIFs)
  • 3rd April 2014: European Parliament adopted its first reading on the regulation
  • 7th Nov. 2014: Following an agreement by EU Member State ambassadors on the Economic and Financial Affairs Council agreed the Council’s General Approach on
  • 19th Nov. 2014: Trilogue on interchange begins
  • 4th Dec. 2014: Second trilogue on interchange

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