The end of interchange fees?
European Commission announces a regulation on multilateral interchange fees (MIF) in 2013. Commerce is hopeful that the era of interchange will soon come to an end.
What is the MIF?
The multilateral interchange fee (MIF) is a fee on a card transaction, charged at the banking level and passed on to merchants and consumers. It is set by the card scheme and/or banks who issue cards and is invisible to consumers who are unable to avoid it.
Why the MIF hampers innovation
Internet purchasing is on the increase and smart-phone technology is going to revolutionise the way we pay. If businesses and consumers are to take advantage of these innovations, we cannot hamper ourselves with last century’s business model.
Electronic payments can take the place of many cash payments in a modern world. They can and should be cheaper, safer and more efficient than cash. Yet, the MIF prevents this. A whole set of business-model and contract-based barriers stands in the way of new entrants to the payments market.
What the MasterCard and Visa cases have changed
The EU competition cases against MasterCard and Visa, initiated by EuroCommerce in 1997, have led to improvements but the MasterCard judgment applies to cross-border fees only, and the real deleterious effects of the MIF are felt at national level. National competition authorities have been slow to follow the EU lead, especially since MasterCard has appealed to the higher Court of Justice.
In May 2012, the European Court upheld the 2007 Commission decision against MasterCard’s MIF. The court found the system to be a price-fixing cartel contrary to European Treaty rules.
Our proposal: the basic payment
EuroCommerce calls for a regulation which dismantles the current closed system and delivers a fundamental change to how we price and pay for electronic payments. Our proposal is that simple, low-cost basic payments should be available across Europe. These should be based on full transparency, priced on cost and charged according to the user-pays principle.
The operation of payments should be split into its necessary elements and each of these should be accessible to new players, allowing more innovation and greater competition. The raft of anti-competitive rules which stifle the market (honour all cards rule, lack of transparency, restrictions on cross-border acquiring) should be removed.
The commerce sector pays out some €25 billion in interchange fees every year.arrow