Visa defends credit-card fees ahead of EU decision

With a Commission decision on fees for credit-card operations expected by the end of the month, Visa Europe warned that the possible abolition of fees could lead to higher costs.

The results of the Commission’s sector inquiry on retail banking will be made public on 31 January 2007. The interchange fee, which is paid at each payment-card operation, has especially come under scrutiny by the Commission. In its preliminary findings the Commission was concerned about price differentials and said there were “indications that banks issuing cards may be obtaining significant economic rents”.

On 11 January 2007 the Commission welcomed the price cuts in cross-border euro payments for consumers that the 2001 EU regulation has brought about. According to the Commission, a €100 cross-border transfer would have cost on average €24 before the EU regulation was introduced; now the average cost is €2.50.

Internal Market and Services Commissioner Charlie McCreevy hopes that the introduction of a Single European Payments Area (SEPA) might bring about similar effects on transaction costs for consumers. He said: “By using fully automated, lower-cost payment systems, this project has enormous potential to bring about huge savings and we fully support it.”

Visa Europe’s President and CEO Peter Ayliffe warned that a move to cut interchange fees could put the Commission’s plan for a European payments area at risk. He urged regulators to recognise "once and for all that interchange is essential for the management of payment systems". Otherwise, he fears that the costs of cards for consumers would increase, offering the example of Australia, where interchange fees have been scrapped by regulators. Moreover, he said the banking industry was burdened with costs of  €10-30 billion to prepare for the full implementation of SEPA by 2010. 

European retail association EuroCommerce opposes the interchange fees, saying they were intransparent and not negotiable, arguing that retailers had no possibility but to pass on additional costs to their customers.

European consumer organisation BEUC  did not comment on the issue. A spokesperson said that card-payment fees were currently not the focus of their activity.

According to Gerard Hartsinkchair of the European Payments Council, SEPA implementation will be delayed because member states have not yet voted on its legal framework.

The interchange fee is paid by the merchant's bank to the cardholder's bank at any point-of-sale transaction using a credit card, such as Visa or MasterCard. 

In 2002, the Commission granted an exemption for Visa's interchange fees, which runs until the end of 2007. Meanwhile, anti-trust proceedings against MasterCard transaction fees are ongoing. 

  • On 31 January 2007 the Commission is to present the results of the sector inquiry into card payments.
  • The adoption of the payment services directive is tabled for early 2007.

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