Will consumers benefit by European Commission Legislation on Interchange Fee Cap?

On 24/07/2013, the European Commission will commence discussion in European Parliament on the maximum cap on interchange fees that can be charged by Card Issuers, in European countries

Since 2000, the European Commission was negotiating with Visa Europe and MasterCard to limit the interchange fees. Finally, the Commission has drafted proposed legislation that—according to Bloomberg—would reduce credit card interchange fees to 0.3 percent and debit card fees to 0.2 percent.

At present, the debit card interchange fees varies from 0.1 percent in Denmark to 1.6 percent in Poland, reported The Financial Times. Germany is a bit higher, with an average of 1.8 percent for credit cards, and France has a lower average of 0.5 percent.

As the interchange fees constitute a sizeable portion of the respective Bank’s fee income, it is not clear if the consumers will be benefited or not. One of the possible options Banks have is to increase the consumer fees.  This would negate the caps imposed by European Commission.

Under the Commission’s proposal the caps would apply only to cross-border transactions for the first two years. After the two-year transition, caps on domestic transactions will also apply.

In countries such as Australia and the US, reductions in interchange fees have resulted in consumers paying higher bank fees. How consumers will fare in the end, is the big question looming over the proposal. EU banks are sure to complain that consumers will lose and retailers will win. EU Parliament has much to consider when future debate about the legislation commences.


Europe at last moves to regulate card fees

Commission to go ahead with cap on card fees

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