European Commission Proposes Cap on Credit, Debit Card Payment Fees

The European Commission (EC) has confirmed plans for legislation to cap some credit and debit card fees. The 28-nation bloc’s executive arm says limiting the fees paid by retailers to banks each time a consumer uses a card will result in annual savings of €6bn and lead to lower prices.

Under the proposal, which requires approval by the European Parliament and member countries, the so-called interchange fees would be capped at 0.2% of a transaction’s value for debit cards and 0.3 percent for credit cards.

The EC estimates that the European Union (EU) payment market is worth €130bn but is “fragmented and expensive”. On average, debit card transactions cost the retailer around €0.10 each, or about 0.2% of the bill, while credit card transactions typically cost much more, at around 0.9%.

Mastercard has already said that any cap could lead to higher card fees for consumers – an argument employed by many banks – but EU internal market commissioner Michel Barnier has dismissed the response as an “unbearable campaign” of disinformation.

“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,” said Barnier.

EC competition chief Joaquin Almunia added: “The interchange fees paid by retailers end up on consumers’ bills. Not only are consumers generally unaware of this, they are even encouraged through reward systems to use the cards that provide their banks with the highest revenues.”

Retailers generally agree that customers could ultimately benefit from lower prices in the shops as a result of the proposals, although they could take years to implement.

Separately, the Commission, as the EU’s competition watchdog, is investigating fees charged by Mastercard and Visa.

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