The interchange fee regulation in an evolving European payments markets: what is the way forward?

DISCLAIMER: All opinions in this column reflect the views of the author(s), not of EURACTIV Media network.

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The European Commission has started assessing the impact and consequences of the Interchange Fee Regulation (IFR) on the payments market. While we welcome the Commission’s initiative, we have several reasons to believe that an assessment of the impact of IFR at this stage is premature.

Going back on IFR

For those who are not familiar with the topic, the interchange fee regulation was introduced in 2013 and among other introduces a fee cap on the so-called interchange fee for card-based payment transactions. The objective of the regulation is to stimulate a competitive and innovative payments environment in Europe by lowering the costs for card payments. However, since the payments market is in a state of transformation and continues to evolve at an ever-increasing speed, we believe that assessing whether the regulation met its objectives at this stage is premature.

The European payments landscape

Since the implementation of IFR in 2015, the European payments market has seen profound changes and continues to evolve at a faster pace than ever before. The payments market is vibrant and competitive with a multitude of providers of payments services and a wide range of different payments solutions to choose between from a consumer and merchant perspective.

In fact, a study by the ECB shows that most euro retail payments are still made in cash[1]. In addition to this, customers and retailers have access to electronic payments solutions such as card, mobile wallets and instant payments. Within the cards space, consumer and retailers can choose between the international 4-party card schemes as well as the domestic card schemes, who are present in nine countries, including the largest EU Member States[2].

Most of the changes related to competition and innovation in the payments market has been market driven or are the result of other pieces of regulation. The revised Payment Services Directive (PSD2), for instance, has altered the competitive landscape, and the continuing work around instant payments will continue to do so.

When it comes to the cost of card acceptance for retailers, several studies indicate that card acceptance cost has decreased in recent years[3][4][5]. One potential element explaining this could be the decrease in interchange fees paid by retailers. However, it is important to note that card acceptance cost depends on a set of factors of which interchange is only one element.

Our opinion

In light of this, two reasons lead us to argue that it is too early to assess the impact of IFR on the European payments market.

The digitalisation and the new technical innovation have changed the way Europeans shop and pay with a significant growth in e-commerce and cross-border commerce and has resulted in a rapidly evolving market. This is further encouraged by new regulation such as PSD2. Given the rapid developments, Payments Europe believes more time is needed to enable the market to evolve by itself, before any further regulatory intervention is considered.

Secondly, we believe that an assessment of the impact of IFR at this stage is unlikely to provide a comprehensive and complete analysis of the impact the regulation itself has had on the payments market as a whole, as the market continues to develop at an ever-increasing speed. We believe that it is thus close to impossible to measure the isolated effects of IFR alone on for instance lower acceptance costs or increased competition.

As such, we consider that assessing the impact of IFR at this stage is premature as it will not give a full picture, neither will it give a rightful one. Payments Europe, however, welcomes efforts to ensure that existing regulation is enforced consistently across the EU. In order to ensure a level-playing field among all players in the European payments market, we recommend the European Commission and Member States to focus on enforcing the current legislation before proposing any amendments to additional legislation.

[1] “The use of cash by households in the euro area”, European Central Bank, November 2017, Available at:

[2] “Study on the application of the Interchange Fee Regulation”, EY & Copenhagen Economics, March 2020. Available at:

[3] “The impact of the interchange fee regulation on merchants: evidence from Italy”, Banca d’Italia, June 2018. Available at:

[4] “Study on the application of the Interchange Fee Regulation”, EY & Copenhagen Economics, March 2020. Available at:

[5] “The functioning of the electronic payment market in Belgium”, Belgian Institute for National Accounts, May 2019. Available at:

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