Will Interchange Fee Caps Kill Commercial Cards?

It had been known since the summer of 2013 that The European Parliament’s Economic and Monetary Affairs (ECON) Committee would vote to introduce a cap on multilateral interchange fees (MIFs) for credit and debit card payments. In a controversial move, the ECON Committee decided to extend the scope to cover that of commercial cards as well.

The hardline approach to a highly criticized sector that has been called anticompetitive and costly by retailers and consumer groups, will limit interchange fees to .3% of the value of a credit-card transaction and 0.2% or  €0.07, whichever is lower, for a debit card transaction.

Visa Europe and MasterCard, together, control more than 95% of the credit and debit market in Europe, report that the caps will hurt both businesses and consumers as banks will resort to other ways to make up for lost fees. Before the vote, MasterCard called on Members of the European Parliament to not include commercial cards in the legislation on interchange fees for electronic payments.

According to the Head of MasterCard Commercial Products Europe, Andrew Buckley, “Treating commercial cards in the same way as consumer cards is like treating a family car in the same way as a commercial truck. Commercial cards were not included in the original proposals for good reasons. They differ significantly from consumer cards in purpose and usage, and bring huge benefits to small businesses. Copy-pasting proposals designed for consumer cards would drive the cost of commercial cards up substantially and make them too expensive for many small businesses.”

Visa Europe, in line with the statements from MasterCard said that the new fees “are set arbitrarily and without impact assessment.” Click here to view MasterCard’s illustration of the many differences between commercial and consumer cards, despite how the ECON committee may see them as one.

The EU believes that the current fee system, where interchange fees vary across country and are set by the credit-card companies, is anticompetitive and artificially increases prices. Opponents to the cap point to Spain as an example of a country that saw caps on MIFs lead to an increase in the cost of payment cards for consumers and small merchants. There has been no impact assessment of the consequences of including commercial cards in a small cap, but the impact has the potential to hit SMEs especially hard.