Multilateral interchange fees are back in the news. We discussed them back in November in the context of Visa Europe’s CBDIP program. Just recently, the European Council approved the latest version as recently amended by the European Parliament (EP). The Interchange Fee Regulation will now be published in the Official Journal of the European Union (OJEU) and enter into force on the 20th day following publication. The latest amendments read as follows:
- Definition of ‘commercial cards’: To ensure that payments made with such cards are charged directly to the company’s account as opposed to simply specifying that the use is ‘for business expenses’.
- Introduction of a definition of ‘point of sale’ in cases of distance sales or merchant not having a fixed place of business or a valid business license.
- Three-party payments schemes: The commission clarified when a three-party payment scheme falls in scope of the Regulation. This occurs if issuance is licensed to a PSP or in case of issuing and/or acquiring with co-branding partner or through an agent.
- Domestic Interchange Fees: As domestic transactions are – at this point – outside the scope of this regulation, Member States will be able to impose a lower cap than the set 0.2% and a fixed maximum fee as a limit for domestic debit cards or allow PSPs to apply a per transaction IC fee of <0.05EUR. This per-transaction IC fee may also be combined with a maximum percentage rate of < 0.2%, provided that the sum of IC fees of the payment card scheme does not exceed 0.2% of the total annual transaction value of the domestic debit card transactions. For domestic credit cards, Member States may define a lower per transaction IC fee cap (than the set 0.3%).
- Acquirer Charges: Acquirers must charge merchant service charges individually specified for different categories and different brands of payment cards with different interchange fee levels, unless payees request the acquirer, in writing, to charge blended merchant service charges.
The Commission hopes these amendments will encourage further payments innovation in the EU. According to EU Competition Commissioner Margrethe Vestager:
This legislation is good for consumers, good for business, and good for Europe. It will lead to lower prices and visibility of costs for consumers. It reduces a ‘tax’ levied on business by banks in the form of interchange fees, and releases the brakes that have so far held back innovation.
However, Visa remains skeptical about this legislation. You can hear more about their perspective here.
What happens next? Following this vote, the European Parliament, EU member states and the European commission will continue to debate the final text of MIF regulations based on these amendments. Keep in mind, a new European Parliament takes office in July.