The European Union proposed on Wednesday to cap fees for bank cards, dismissing arguments by providers such as MasterCard that consumers will ultimately have to pay more.
“The proposed changes to interchange fees will remove an important barrier between national payment markets and finally put an end to the unjustified high level of these fees,” said the EU’s market regulation commissioner, Michel Barnier.
Practically everyone with a bank account in the EU has a debit card, while 40 per cent also use a credit card, according to the bloc.
The EU’s executive, the European Commission, has for years been investigating interchange fees, which banks pay each other to process payments made by debit or credit cards. It has launched several anti-trust probes involving card giants Visa and Mastercard.
It is now proposing to introduce legislation that would cap the fees across the EU at 0.2 per cent of transactions for debit cards and 0.3 per cent for credit cards — first for cross-border transactions and then for domestic transactions after 22 months.
The move will approximately halve the total amount of fees collected, according to media reports.
“The interchange fees paid by retailers end up on consumers’ bills,” EU Competition Commissioner Joaquin Almunia said. “The regulation capping interchange fees will prevent excessive levels of these fees across the board. A level playing field will be created.” “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,” he added.
But opponents of the measure reject those claims, with MasterCard warning of “unintended consequences.” “History has shown that the biggest losers in the event of interchange regulation are consumers and small businesses,” the credit—card giant said in a recent statement.
“We have seen this happen in Australia, Spain and the United States.” EU member states and the European Parliament would have to approve the commission’s proposal for it to become law.
It also foresees a ban on surcharges that retailers apply to card payments — for instance for flights booked with low-cost airlines.
The only exception would be for more expensive cards that will not be subject to the capped fees, such as American Express and Diners.
The commission’s package additionally includes measures to increase the security of online transactions and better protect consumers against payment fraud.