Euromoney.com Transaction Services

JOIN US UNINTENDED CONSEQUENCES OF REGULATION “The payment market in the EU is fragmented and expensive, with a cost of more than 1% of EU GDP or €130 billion a year. These are costs our economy cannot aﬀord.” Michel Barnier, European Commission Card interchange fees represent a cost our economy cannot   aﬀord,   says   internal   market   and   services    commissioner   Michel   Barnier,   as   the   EU   unveiled   its    long-awaited   cap   on   credit   and   debit   card   transaction   fees.    Analysts   warn   the   proposal   could   wipe   out   billions   of   proﬁt    in the payment industry, transfer costs to consumers and negatively   change   payment   behaviour.    The   EU’s   attempt   to   moderate   card   charges,   levelled   by    merchants for retail transactions, could have the perverse result   in   pushing   up   the   cost   of   using   debit   cards   in   the   UK    and elsewhere, say analysts. The   comments   come   as   the   European   Commission’s    revised   Payment   Services   Directive   proposes   a   cap   on   the    interchange   fees   charged   on   Visa-   and   MasterCard-branded    cards   to   0.3%   and   0.2%   respectively   for   credit   and    debit   cards.    “The   payment   market   in   the   EU   is   fragmented   and   expensive,   with   a   cost    of   more   than   1%   of   EU   GDP   or   €130   billion   a   year,”   he   says.   “These   are    costs   our   economy   cannot   aﬀord.   Our   proposal   will   promote   the   digital    single   market   by   making   internet   payments   cheaper   and   safer,   both   for    retailers   and   consumers.”    In   a   directive   that   will   make   grim   reading   for   the   card   issuing   banks,   “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”,   says   Barnier.    And   although   consumers   have,   in   theory,   been   shielded   from   the    interchange   fees,   which   are   footed   by   the   retailers,   EU   Commission    vice-president   Joaquín   Almunia   argues   the   consumers   do   ultimately    bear   the   cost. Read more of Sid Verma and Solomon Teague’s EU card-fee cap move sparks backlash > Internal   market   and   services   commissioner   Michel   Barnier    hit out at card companies, insisting the interchange fees were   contributing   to   the   EU’s   economic   malaise.    “Not only are consumers generally unaware of [card interchange fees]… they are even encouraged through reward systems to use the cards that provide their banks with the highest revenues.” Joaquín Almunia, European Commission Copyright:   All   material   subject   to   strictly   enforced   copyright   laws.   ©   2014   Euromoney   Institutional   Investor   PLC 7| PREVIOUS |8 NEXT

Euromoney.com Transaction Services | Page 8