PURPOSE: to lay down uniform technical and business
requirements on interchange fees for card-based payment
transactions.
PROPOSED ACT: Regulation of the European Parliament
and of the Council.
ROLE OF THE EUROPEAN PARLIAMENT: the European
Parliament decides in accordance with the ordinary legislative
procedure and on an equal footing with the Council.
BACKGROUND: the regulatory and legislative framework
for retail payments in the EU has been developed over the past 12
years, with the advent of the Euro acting as an accelerating
factor.
One of the key practices hindering the achievement of
an integrated market reasons is the widespread use of so-called
Multilateral Interchange Fees (MIFs). At present, no
legislation regulating interchange fees is in place in the EU. MIFs
are collectively agreed inter-bank fees usually between the
acquiring payment service providers and the issuing payment service
providers belonging to a certain scheme. Such interchange fees paid
by acquiring payment service providers form part of the fees they
charge to merchants which merchants in turn pass on to consumers.
Thus, high Interchange Fees paid by merchants result in higher
final prices for goods and services, which are paid by all
consumers.
There currently is a wide variety of interchange
fees applied within national and international payment card
schemes, which gives rise to market fragmentation and prevents
retailers and consumers from enjoying the benefits of an internal
market for goods and services.
Market entry for pan-European players remains
difficult, as domestic interchange fees in EU Member States vary
widely and new entrants would have to offer interchange fees at
least comparable to those prevailing in each market they want to
enter. The entry barriers interchange fees thus created for online
and mobile payment solutions also result in less
innovation.
Over the last 20 years, the European Commission and
national competition authorities have conducted a number of
antitrust proceedings addressing anti-competitive practices
in the card payment market. The General Court judgment of May
2012 confirmed the Commission's finding in its MasterCard
Decision of December 2007 that MIFs restrict competition as
they inflate the cost of card acceptance by merchants without
leading to benefits for consumers.
In its non-legislative resolution of 20 November
2012 on the Green Paper 'Towards an integrated
European market for card, internet and mobile payments, the
Parliament took a firm position in favour of providing clarity on
interchange fees to market participants and expressed itself in
favour of a gradual approach leading to a ban on interchange
fees through regulation.
LEGAL BASIS: Article 114 of the Treaty on the
Functioning of the European Union (TFEU).
IMPACT ASSESSMENT: the impact assessment considers six
scenarios for interchange fees. The assessment concludes that the
most beneficial option appears to be a combination of:
- capping the level of interchange fees for cross-border
transactions with consumer debit and
credit cards (in the first stage) and, in a second stage, capping
the level of interchange fees also for domestic transactions with
consumer credit cards and consumer debit cards;
- a series of measures to enhance effective market
functioning including the limitation
of the rule allowing merchants to determine the choice of card
brand at the point of sale for all cards and card-based
transactions based on four party scheme models.
CONTENT: the present regulation, combined with the
proposed revised Payment Services
Directive, proposes to create common rules for
interchange fees in the European Union by introducing maximum
fee levels for transactions with payment cards that are widely used
by consumers and thereby difficult to refuse or surcharge by
retailers. The regulation will in addition propose transparency
measures to allow retailers and consumers to make better
informed choices of payment instruments.
Capping interchange fees: the Commission proposes to set caps for interchange
fees to payment service providers of 0.2% and 0.3% for the value
of the transaction for all consumer debit and credit
transactions. These figures have been accepted by Visa,
MasterCard and the French domestic card scheme Groupement Cartes
Bancaires.
- During a transition period of two years, maximum
levels of interchange fees are imposed for
cross-border transactions (where the card holder uses
their card in another Member State) or cross-border acquired
transactions (where the merchant uses an acquiring PSP in another
Member State) only.
- After a transitional period, the regulation of
interchange fees for consumer cards should therefore be extended to
cover also domestic interchange fees.
Business rules: the
proposed Regulation contains measures as regards business rules
that will be applicable to all categories of card
transactions and card-based payment transactions based on
those. As of the entry into force of the regulation, for
instance:
- the application of the 'Honour All Cards Rule' will
be limited. No discrimination will be nonetheless allowed on
the basis of the issuing bank or the provenance of the card holder
and between the cards carrying the same interchange fee
level;
- the application of any rule preventing or limiting
merchants from steering customers to more efficient payments
instruments ('no steering rules') will be
prohibited;
- acquiring Payment Service Providers will provide at
least monthly statements of fees to merchants, in which the
fees paid by the merchant over the relevant month concerning each
category of cards and each individual brand for when the acquirer
provides acquiring services is specified;
- the application of any rule withholding merchants from
disclosing to their customers fees they pay to payment services
acquirers will be prohibited.
BUDGETARY IMPLICATIONS: the proposal does not have any
impact on the EU budget.