European Commission rules in favour of reducing ‘inter-regional’ interchange debit and credit card fees

EUROPE. The European Commission has announced a ruling that will lead to an approximate 40% reduction in Visa and MasterCard ‘inter-regional’ interchange fees within six months.

Interchange fees are default fees that are charged between the card issuing bank and the merchant’s bank on each transaction.

The new ruling applies to non-EU consumer debit and credit cards used in European stores, including in travel retail, and will provide greater transparency for the fees according to The Travel Retail Fair Payment Alliance.

Outline proposals were reported at the end of last year, but a formal market consultation process was required with the parties involved and other stakeholders over the terms of the proposed commitments.

Following this consultation, the commission has decided MasterCard and Visa’s proposals address their anti-trust concerns. This means the proposals become binding commitments within six months across the European Union (EU) and European Economic Area (EEA) for the next five and a half years – with strict ‘non-circumvention’ rules.

A coalition of travel retailers, downtown stores and others lobbied for the removal of interchange fees, with Kappé International Chairman Jacques Parson leading the campaign on behalf of travel retail.

Kappé International Chairman Jacques Parson: “This is important news for a truly global shopping channel like travel retail.”

In a 2015 ruling, the EU recognised the fees were not competitive. It also said the fees were outside of European competition rules because they created a floor when negotiating merchant service charges.

However the investigation into non-EU, or ‘intra-regional’ fees, was “understandably complex”, according to The Travel Retail Fair Payment Alliance. The investigation culminated in a closed hearing, where Parson and EuroCommerce Director-General Christian Verschueren successfully argued the retail case.

As a result, MasterCard and Visa will now cap face-to-face, ‘customer present’ transactions at 0.2% for consumer debit and 0.3% for consumer credit card transactions. Remote (online or phone) ‘customer not present’ transactions will be capped separately at 1.15% for consumer debit and 1.5% for consumer credit transactions.

This means travel retailers will now pay the same cardholder present interchange fees as a transaction involving a European-issued card when a customer uses a consumer card issued elsewhere, such as the USA.

While The Travel Retail Fair Payment Alliance said this was “very good news” for travel retail as an international channel, it said there was “some disappointment” that commercial cards and scheme fees were not addressed in the decision. Campaigners also thought creating a separate, higher cardholder not present card interchange fee was “unnecessary”, it said.

Parson commented: “Overall, this is important news for a truly global shopping channel like travel retail and I thank the commission for listening to our concerns. But we must not sit back. The next steps are to address commercial cards and scheme fees within the EU’s current interchange fee legislation as part of the review process that is taking place at the moment.”

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