April 29, 2019
The European Commission has announced its acceptance of legally binding 5-and-a-half year commitments from Mastercard and Visa to cut interregional interchange fees by approximately 40%.
Interregional interchange fees, also known as interregional multilateral interchange fees, are applied to payments made when a credit or debit cardholder from outside the European Economic Area makes a purchase inside the area — for example an American tourist dining at a restaurant in Belgium.
"Mastercard and Visa have committed to significantly reduce the interchange fee applied to payments made in Europe with cards issued elsewhere," Commissioner Margrethe Vestager, who is in charge of EEA competition policy, said in the announcement. "The commitments, which are legally binding on Visa and Mastercard, will reduce the costs borne by retailers for accepting payments with cards issued outside the EEA."
Within six months, Visa and Mastercard will lower the fees for in-store purchases by 0.2% of the value of the transaction for debit cards and by 0.3% for credit cards. For online purchases, the companies will lower fees by 1.15% for debit cards and 1.5% for credit cards.
Vestager said that the agreement, combined with a January decision on cross-border payments, will serve to lower prices for European retailers to do business, which ultimately will benefit consumers.
When a consumer makes a purchase, the bank of the merchant — i.e., the acquiring bank — pays a multilateral interchange fee to the bank of the cardholder — i.e., the issuing bank. The acquiring bank passes the cost of the fee to the retailer, who passes it on to consumers.
The EC first informed Mastercard of its concerns about interregional MIFs in July 2015 and informed Visa in 2017. The concern was that the fees might increase prices in an anticompetitive manner for customers of retailers accepting cards from outside the region.
Topics: Bill Payment, Region: EMEA, Regulatory Issues
Companies: Visa, MasterCard
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