Mastercard and Visa are proposing fee cuts in the EU

, Modernización de Empresas, Retail, Tarjetas y Pagos Electrónicos

An ongoing antitrust investigation by the European Commission asserts that interchange fees charged to merchants to accept cards results in higher prices for consumers.To help resolve a related investigation by the European Union (EU), Visa and Mastercard proposed to cut their interchange fees on purchases made on non-EU credit and debit cards by at least 40%, according to Reuters.

MasterCard, Visa, credit card

MasterCard, Visa, credit card

The proposed changes include a 0.2% fee on in-store debit card transactions and 0.3% fee on in-store credit card transactions.
For online transactions — which often come with higher fees because they are riskier, per a Visa spokesperson cited by The Wall Street Journal— the networks proposed to charge 1.15% for debit cards and 1.50% for credit cards.
The Commission is accepting third-party feedback for a month before making its decision as to whether it will accept Visa and Mastercard’s proposal or demand greater fee cuts. The new rates would go into effect six months following its decision and would ultimately stay in effect for 5.5 years.
European authorities have been disputing networks’ interchange fees for years. The European Commission raised concerns over Mastercard’s interchange fee practices for cross-border transactions in 2007 and released a statement in 2009 objecting to Visa’s interchange practices, according to The Wall Street Journal.
And merchants have taken issue with the card giants as well: Since 2013, over 400 merchants in the UK sued Visa seeking damages for interchange fees, 75 of which Visa has said it settled with so far.
Interchange fees have led to long-running tensions between merchants and card networks globally. In North America, they have become a huge burden for merchants, which paid $43.4 billion in Visa and Mastercard credit card interchange fees in 2017, up from $25.9 billion in 2012, according to The Nilson Report, per The WSJ.
That’s ultimately led to sizable lawsuits: Earlier this year, Visa and Mastercard — as well as major issuing banks like Bank of America, Citi, and JPMorgan Chase — agreed to a $6.5 billion settlement for the antitrust lawsuit initially filed against them in 2005 by merchants regarding the interchange fees they charged.
The settlement — which marked the largest antitrust deal in history — applied to a long-running class-action lawsuit that was filed by merchants on the basis that card networks and banks colluded to inflate fees. And Canada’s finance minister announced agreements with Visa, Mastercard, and American Express that will lower interchange and other card acceptance fees to cut merchants costs associated with card acceptance.
This follows retailer pushback that led in a temporary ban of Visa cards at Walmart Canada, for example. And these are just a few of many examples of the ongoing battle over interchange that’s been a pain point for retailers worldwide.
Rulings on interchange have been mixed, though, and the outcome of this proposal could dictate how major players generate revenue. Mastercard lost a major interchange suit in 2016, but Visa won a similar case that year, so it’s hard to tell what the outcome of this proposal will be.
The European Commission’s ruling might dictate how these networks will generate revenue going forward, especially if it demands further cuts to interchange fees, which might make it necessary for card networks to evaluate their fee structure.


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