EU plans to tackle ‘unjustified’ high card fees
The Commission hopes that cutting the fees will help the European economy grow.
It estimates that the EU payment market is worth €130bn a year, and that these new changes will remove an important barrier between national payment markets.
The caps are set at 0.2% of the value of the transaction for debit cards and 0.3% for credit cards.
The interchange fees involved are paid by shops and businesses to banks, every time a consumer uses his or her card.
Joaquín Almunia, vice president of the EC, said: “The interchange fees paid by retailers end up on consumers’ bills. Not only are consumers generally unaware of this, they are even encouraged through reward systems to use the cards that provide their banks with the highest revenues. Complementing the enforcement of antitrust rules, the regulation capping interchange fees will prevent excessive levels of these fees across the board.
“A level playing field will be created for payment services providers, new players will be able to enter the market and offer innovative services, retailers will make big savings by paying lower fees to their banks, and consumers will benefit through lower retail prices.”
Retailers say customers could ultimately benefit from lower prices in shops as a result of the proposals, which could take years to implement.
However banks argue that consumers will instead end up paying higher charges to use debit and credit cards.
Managing director of payments solution firm PSI-Pay, Phil Davies, argues that the caps will push the cost to the consumer up even more.
He said: “We expect a move like this will see card issuers losing out on a revenue stream, which currently helps to reduce costs to consumers, and therefore looking at ways in which this can be recouped. The likely result will be increased cardholder fees, interest rate hikes and, possibly, card issuers putting greater restrictions in place as to whom they lend to.
“The impact of such a move is likely have a significant knock on effect. In order to compensate for loss of cash, card issuers will look to other areas where reductions can be made. This could be a reluctance to invest in technology or improved security measures. Plus lack of available cash might mean lack of lending with banks more hesitant and reluctant to part with their money.
“Ultimately, it’s a case of if it isn’t broke don’t fix it. The EU should look at the examples of Australia – it hasn’t proven successful in other countries and will only result in more financial uncertainty.”