Brussels, 25/07/2013 (Agence Europe) - As was to be expected, banks and payment networks are highly critical of the European Commission's desire to reduce excess charges for the use of bank cards, while traders and consumers are delighted with the draft legislation unveiled by the European Commission on Wednesday 24 July (see EUROPE 10895).
The European Banking Federation (EBF) says: “A cap on MIFs is likely to impact negatively card payment services”. For multilateral interchange fees (MIFs), the Commission is proposing a 0.2% cap on charges for using a debit card and 0.3% for using a credit card. In a press release, the EBF explains: “One of the key services financed by the interchange fees is the guarantee received by the merchant that all purchases will be paid to him independently of the circumstances (counterfeiting, fraud, theft etc). This guarantee does not exist on other means of payment (e.g. cash)”. The EBF says that the service provider commercial model will make consumers bear the costs, rather than retailers. In countries where MIFs are capped, Australia and Spain for instance, the reduction in fees has not led to a reduction in consumer prices.
Welcoming the Commission's desire to regulate payment service providers that are currently excluded from prudential European rules (mobile phone companies, for example), the European Association of Cooperative Banks (EACB) criticises the way that “non-banks will get access to the accounts of bank customers. On their side, banks will have the obligation to provide them with information on the availability of funds on their customers' accounts and execute the payments initiated by these non-banks”. “Banks will have to have 'blind faith' as regards the instructions provided by these non-banks which interfere with the relationship between the consumer and his/her bank, and will have no tools to protect their customers' data and interests”, said Hervé Guider, General Manager of EACB. The organisation is calling for provisions that clearly determine the liabilities of TPPs and for traditional banks to be able to request from such non-banks an agreement aimed at covering the risks that their intervention generates in the payment transactions.
The MasterCard network, which, along with Visa, accounts for more than 90% of the market, is up in arms at the draft rules. Its president, Javier Perez, says that restricting MIFs and restrictions on the obligation to accept all cards will hold back competitiveness and innovation in the payment market. American Express, which holds a tiny share of the payment card market, is not concerned about the legislation because, unlike the dominant networks, Visa and MasterCard, American Express didn't set collective prices and doesn't use inter-bank arrangements. American Express points out that governments around the world do not find its pricing practices anti-competitive, including in Europe and, unlike what happens with Visa and MasterCard, retailers are not forced to take American Express.
Retailers are generally delighted. EuroCommerce, which represents wholesalers and retailers in Europe, commented: “These proposals are a very significant step to bring competition and transparency into how payments are made and paid for. They should allow retailers to pass savings on to consumers, bringing them real benefits in these times of hardship”, said Christian Verschueren, Director General of EuroCommerce, adding: “However, the proposals fall short of the ideal: merchants had hoped for the abolition of the MIF as a concept, certainly on debit”.
The European Retail Round Table (ERRT) of outlets like IKEA, Tesco and H&M, said: “A move away from percentage fees to flat, cost-based transaction fees would have been more reasonable, especially for debit cards”.
On behalf of European consumers, BEUC was pleased that the EU rules will cover previously unregulated service providers: “Payment methods which are now commonplace, did not exist only a few years ago. When laws do not keep pace, shoppers can lose out. For consumers the equation is easy - they want secure, cheap and simple means of payments”, explained BEUC Director general Monique Goyens. She added: “Interchange fees are a convenient income for banks and card companies. But they prevent new players offering cheaper and more secure solutions from entering the market as it would mean less revenue for banks. That unfair surcharges are to become a thing of the past is good news. Companies have shamelessly used them to reap extra profit from people paying by card. Such practices rightly annoyed Europe's consumers as they essentially punished them when making a payment”. (MB/transl.fl)