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EU Welcomes Reductions To Visa Debit Card Fees

by Ulrika Lomas, LawAndTax-News.com, Brussels

13 December 2010


The European Commission (EC) has legally binding the commitments offered by Visa Europe to significantly cut its multilateral interchange fees (MIFs) for debit card payments.

MIFs are set directly by Visa in the European Economic Area (EEA) for point of sale transactions with consumer payment cards. They apply to all cross-border transactions in the EEA, as well as to domestic transactions in nine European Union (EU) member states (Belgium, Greece, Hungary, Ireland, Italy, Luxembourg, Malta, the Netherlands and Sweden). In the other member states, the Visa MIFs applying to domestic point of sale transactions are set between domestic banks.

These inter-bank fees are paid by merchants' banks (acquiring banks) to cardholders' banks (issuing banks) for point of sale transactions with Visa's consumer payment cards, and are ultimately passed on to consumers through retail prices. Following the opening of formal EU proceedings against Visa a year earlier, the EC communicated its preliminary view to Visa in April 2009 that its MIFs restricted competition between the banks of the merchants.

The EC’s view was that, while MIFs are not illegal, they are only compatible with EU antitrust rules if they contribute to technical and economic progress for the benefit of consumers. The EC's preliminary view was that the MIFs set by Visa restricted competition without any benefit to consumers.

Under the new commitments, the maximum weighted average MIF applicable to debit card cross border transactions and to national debit transactions in those countries where MIFs are set directly by Visa Europe will be cut to 0.2% of the value of the transaction. This represents a reduction of about 60% on average for domestic MIFs and 30% for cross-border MIFs.

It is believed that that level of MIF reflects the application of the "merchant-indifference methodology", which seeks to establish the MIF at a level at which merchants have no preference whether a payment is made with a Visa Europe debit card or with cash.

Furthermore, Visa Europe committed to maintain and further develop measures which will increase transparency and competition in the payment cards markets. The EC considers that the offer is suitable to remedy the competition concerns and closed part of its investigation.

The EC Vice-President in charge of competition policy Joaquín Almunia, commented: "Lower inter-bank fees will trigger real benefits for merchants and consumers whilst more transparent rules will also improve competition in the cards markets."

TAGS: European Commission | law | banking | financial services | fees | regulation | European Union (EU) | services | Europe

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